Judicial Summary: GST Classification for Corporate Food Supply Contracts

The intersection of logistics, food aggregation, and corporate catering frequently creates complex classification disputes under the Goods and Services Tax (GST) regime. A prominent illustration of this complexity is found in the appellate advance ruling of In re Frutta Services Private Limited.

In this significant judicial decision, the Tamil Nadu Appellate Authority for Advance Ruling (AAAR) evaluated whether providing daily meals to corporate employees through third-party kitchens constitutes a simple sale of goods (attracting a lower tax rate) or a composite supply of services (taxable at a higher standard rate). The authority ultimately classified the transaction as a contract food service, thereby attracting an 18% GST rate.

Background of the Dispute

The assessee, operating as a corporate food aggregator, filed an appeal under Section 100(1) of the Central Goods and Services Tax Act 2017 and the Tamil Nadu Goods and Services Tax Act 2017. The appeal challenged the initial Advance Ruling No.60/ARA/2025 dated 16.12.2025.

The assessee's business model involved procuring breakfast, lunch, and dinner from various independent kitchens and delivering these meals to corporate client locations. The core of the dispute revolved around the appropriate GST classification and the corresponding tax rate for these activities.

The Assessee's Primary Contentions

The assessee presented several arguments to support the classification of their business as a mere supply of goods or, alternatively, as a restaurant service:

  • No Manufacturing or Preparation: The company argued that it functioned strictly as an aggregator. It did not operate kitchens, cook meals, or process food items.
  • Bifurcation of Supply: The assessee proposed that the transaction should be split. The logistics and delivery component should be taxed at 18%, while the actual food supply should be treated as a restaurant or food service taxable at the concessional rate of 5%.
  • Dominant Intention Test: Relying heavily on the landmark Supreme Court judgment in BSNL v. Union of India, the assessee contended that the primary objective of the corporate clients was to purchase food, not to receive a service.
  • Standard Contractual Clauses: The company asserted that contractual terms regarding delivery timelines, quality checks, and hygiene were standard conditions of sale, not indicators of a service contract.