GST Rate Applicability on Outdoor Catering: AAR Mandates 5% Concessional Rate, Rejects 18% ITC Option
The classification of services and the corresponding tax rates under the Goods and Services Tax (GST) regime have frequently been subjects of intense legal scrutiny. One of the most debated areas involves the food and beverage industry, specifically catering services. A recent landmark ruling by the Tamil Nadu Authority for Advance Ruling (AAR) in the case of In re Friends Catering CBE has provided critical clarity on the taxation of outdoor catering services.
The core dispute addressed in this ruling revolves around whether an assessee engaged in outdoor catering can voluntarily opt for a higher GST rate of 18% to avail Input Tax Credit (ITC), or if they are strictly bound by the concessional rate of 5% without ITC. Furthermore, the ruling delves into the nuances of what constitutes a "composite supply" under the Central Goods and Services Tax Act, 2017 when food is supplied with or without on-site service personnel.
This comprehensive analysis breaks down the factual background, the legal arguments presented, the statutory interpretations applied by the AAR, and the broader implications for the catering industry.
Factual Matrix of the Case
The assessee, operating under the name In re Friends Catering CBE, is a registered entity under the GST framework in Tamil Nadu. The primary business of the assessee involves providing outdoor catering services for various occasional events such as marriages, exhibitions, and corporate functions. Crucially, the assessee does not operate from any "specified premises" (such as high-end hotels) nor do they provide any hotel accommodation services.
To seek clarity on their tax liabilities, the assessee filed an application under Section 97(2) of the Central Goods and Services Tax Act, 2017, paying the requisite statutory fee of Rs. 5,000 under Rule 104 of the Central Goods and Services Tax Rules, 2017 and the corresponding State GST Rules.
The assessee's business operations were bifurcated into two distinct service models:
- **Comprehensive On-Site Catering (Model A)😗* In this model, the assessee prepares the food at their centralized kitchen, transports it to the client's venue, and deploys their own manpower to serve the food and manage the catering logistics during the event.
- **Delivery-Only Catering (Model B)😗* Under this secondary model, the assessee merely prepares the food at their premises and transports it to the client's location. The risk transfers to the client upon delivery, and the assessee does not provide any on-site labor, serving staff, or event management support.
The assessee sought an advance ruling to determine the appropriate Service Accounting Code (SAC) for both models and to ascertain if they possessed the legal right to choose between two different tax rate entries under the prevailing GST notifications.
The Assessee's Interpretation of the Law
The crux of the assessee's argument rested on the interpretation of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as subsequently amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019.