In re Merit Hospitality Services Private Ltd (GST AAR Maharashtra)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and the MGST Act”] by Merit Hospitality Services Private Ltd., the applicant is seeking an advance ruling in respect of the following questions :
The company is registered as “Outdoor Caterers” under the GST Act. It was also registered in the same category under service tax regime The company is engaged in the business of supply, by way of and as a part of and in any other manner whatsoever of goods, being food and any other article for human consumption or drink. In nutshell it is providing snacks and food for breakfast, lunch, evening tea and dinner to the employees of various companies. The food is prepared at our own kitchen and it is distributed to various companies at different locations. There are 4 different situations mentioned below on the basis of which the company is carrying on the abovementioned business. These situations are based on the terms of contract entered by Merit Hospitality with various corporate clients.
Case l) The company (Merit Hospitality) has entered into a contract for supply of food to the employees of the company say ‘A’ Ltd. The contract is signed between Merit Hospitality and ‘A’ Ltd for supply of food. As per the terms of contract Merit Hospitality has to supply the food at ‘A’ Ltd.’s premises. The distribution of the food is directly done by the staff of ‘A’ Ltd. The menu and the material specifications are mentioned in the contract and also the rate for various items are pre-determined between Merit Hospitality and the company. The billing is done by Merit Hospitality directly to the company on monthly basis and payment is received from the company to Merit Hospitality directly as per the terms of payment mentioned in the contract.
Question: Whether on the facts and circumstances of abovementioned case can the above activity be called as canteen activity and the applicable rate of 5% be charged on our bills?
Case II) The facts mentioned in Case I remains the same except that in addition to supply of food on the request of the client Merit Hospitality Services Pvt. Ltd. also undertake the services of distribution of food for which Merit Hospitality raises separate bill charging 18% GST/SGST
Question : Can both the activities put together i.e. supply and distribution of food to the employees of ‘A’ ltd as canteen services and applicable rate of 5% be charged on our bills?
Case III) The employees of ‘A’ Ltd. have formed “Employees Co-op. Society ” which is registered under The Societies Registration Act. The Employees Co-op. Society is running a canteen for the employees of ‘A’ Ltd. The contract of supply of food of Merit Hospitality is now with “Employees Co-op. Society ” and not with “A ” Ltd.
Question: Under such circumstances can it still be claimed that Merit Hospitality is running a canteen and the applicable rate of 5% be charged on our bills ?
Case IV) The Merit Hospitality has entered into a contract with a company called say “B” Ltd. “B” Ltd. is having its unit in SEZ area ( Special Export Zone). The supply of food is done by Merit Hospitality to the employees of “B ” Ltd. and payment for the same is made by the employees of “B ” Ltd. directly to Merit Hospitality.
Questions : a) Can Merit Hospitality claim that since the food is supplied directly to SEZ area hence no GST is applicable ? or
b) Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? Or
c) Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only?
At the outset we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submission, as reproduced verbatim, could be seen thus –
“Provisions of law, applicants view point & submissions on issues on which advance ruling is sought.
The services under discussion fall under SAC classification No 996333 Where under notification no [Serial No. 7(i) of notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017 the rate of GST is stated at 2.5% as applicable to supply of food and beverages by a canteen’ . The rates applicable in case of ‘outdoor caterer’ are defined separately at 9% under (v) in column of serial no 7in same notification no 46 under 7(v).
A latest GST circular no.08/01/2018 in the matter of supply of food by hostel mess in colleges has clarified that The educational institutions have mess facility for providing food to their students and staff. Such facility is either run by the institution/ students themselves or is outsourced to a third person. Supply of food or drink provided by a mess or canteen is taxable at 5% without Input Tax Credit [Serial No. 7(i) of notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017 refers] It is immaterial whether the service is provided by the educational institution itself or the institution outsources the activity to an outside contractor.
It is our contention that the issue of running a canteen for its employees by a company either by itself or through an outside caterer is on the same line and hence should be considered under the same principles where it is clarified that tax rate will be 5% without input tax credit as such services fall under category (i)under column 3 of serial no 7 notification No. 46/2017-CT (Rate) dated 14.11.2017“
03. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reproduced verbatim, could be seen thus-
” 1. Case I) Question: Whether on the facts and circumstances of above mentioned case can the above activity be called as canteen activity and the applicable rate of 5% be charged on our bills?
Reply: No
Comments: The activity of canteen is to supply services to beneficial members. In this case it is agreement of supply of food and Beverages to another company. This activity falls under the outdoor catering. The notification Dt. 28.06.2017 vide entry No.7 under Heading 9963 ( Accommodation food and beverage services ) vide sub entry V specifically mentions “Supply by way of or as part of any service or in any other manner whatsoever in outdoor careering wherein goods, being food or any other article for human consumption or any drink ( whether or not alcoholic liquor for human consumption), as a part of such outdoor catering and such supply or service is for cash, deferred payment or other valuable consideration.
The dictionary meaning of canteen is “a restaurant provided by an organization such as a college, factory, or company for its students or staff whereas Dictionary meaning of Outdoor catering is “a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services” Considering the above meaning the activity of the dealer cannot be considered as canteen activity as the dealer is in the business of supplying food and beverages to the company on the basis of agreement and hence it is purely outdoor catering service. further the notification dt. 14.11.2017 has not changed the position of the supply by outdoor caterers given in original notification dt. 28.06.2017 in Clause V. Hence, the activity of the dealer cannot be called as canteen activity and liable to pay tax @ 9% as outdoor caterer.
2. Case 2) Question : Can both the activities put together i.e. supply and distribution of food to the employees of ‘A’ Ltd. be called as canteen services and applicable rate of 5% be charged on our bills ?
Reply: No
Comment: As above
3. Case 3) Question : Can such circumstances can it still be claimed that Merit Hospitality is running a canteen and the applicable rate of 5% be charged on our bills ?
Reply: No
Comment: As above
4. Case 4) Question:
(a) Can Merit Hospitality claim that since the food is supplied directly to SEZ area hence no GST is applicable ? or
(b) Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? or
(C) Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only?
Reply: No
Comment: As above
Additional submissions
