2018 (11) TMI 1012 - AAR - GST

Classification of services - catering services provided by the Applicant under B2B Model and B2C Model - whether classified as canteen/restaurant services or under the head outdoor catering services? - rate of tax - whether the activities of the applicant would fall under Sr. No. 7 Headings 9963 (iv) or (v) of the N/N. 11 /2017-Central Tax (Rate) dated 28th June 2017? Held that - The services supplied by the applicant in normal course does not appear to be covered under clause (v) of the N/N. 11 /2017-Central Tax (Rate) dated 28th June 2017. From a reading of clause (v) before and after the amendment it is seen that the word outdoor catering does not find a mention post the amendment. Hence it can be inferred that the said clause post the amendment made considers outdoor catering as a Supply by way of or as part of any service of goods being food or any other article for human consumption or any drink at Exhibition Halls Events Conferences Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature. The applicant has clearly stated that they are providing services only to industries and corporates and for their employees - the clients of the applicant are providing space etc. to the applicant for supply of catering services and the services are supplied by the applicant at the clients premises. The service being provided by the applicant would be covered under Serial No. 7 Heading 9963(i) or (iv)of Notification No. 11/2017 dated 28.06.2017 as the applicant can be said to be providing the services of a canteen but as to the applicant falls under Sr. No.(i) or (iv) of the said Notification would depend on whether the canteen has the facility of is air conditioning or central air-heating in any part of the establishment at any time during the year as the applicant has not clarified the same anywhere. The said clause (i) has been amended by Notification No. 16/2017 - The amendment has also done away with the condition of Supply provided by a restaurant eating joint including mess canteen neither having the facility of air-conditioning or central air-heating in any part of the establishment at any time during the year and therefore the services of the applicant in view of amendment vide Notification No. 46/2017 dated 14.11 2017 would fall under Serial no. 7(i) of this amended Notification. Thus the activity of the applicant would fall under clause (i) of Notification No. 11/2017 as amended and with effect from 14.11.2017 i.e the date on which Notification No. 46/2017- Central Tax(Rate) came into effect. Ruling - The activity undertaken by the applicant in the subject case would be classified as canteen services under Entry. No 7(i) or (iv) of Notification No. 11/2017 dated 28th June 2017 depending on whether their canteen has the facility of air air-conditioning or central air-heating in any part of the establishment at any time during the year. However as per amended Notification No. 46/2017- Central Tax (Rate) dated-14th November 2017 their service would fall under Sr. No. 7(i) of this amended Notification.

Summary

Issues Involved:
1. Classification of catering services under B2B and B2C models.
2. Determination of applicable GST rates under Notification No. 11/2017 and its amendments.

Detailed Analysis:

Issue 1: Classification of Catering Services under B2B and B2C Models

Applicant's Submission:
The applicant provides catering services to industries and corporates under two models:
- B2C Model: The applicant enters into contracts with companies to provide catering services directly to employees, who pay the applicant directly.
- B2B Model: The applicant contracts with companies to serve food and beverages to employees within the company premises, with the company paying the applicant.

The applicant currently classifies B2C services as canteen/restaurant services under Entry No. 7(i) of Notification No. 11/2017 and B2B services as outdoor catering services under Entry No. 7(v).

Applicant's Argument:
The applicant argues that both B2B and B2C services should be classified as canteen services. The applicant cites previous acceptance of their services as canteen services under the Service Tax regime and references dictionary definitions and circulars to support their claim. They argue that the nature of services has not changed under the GST regime, and thus, both models should be treated as canteen services.

Concerned Officer's Submission:
The officer contends that the applicant is providing outdoor catering services, as the services are rendered at a place other than the applicant's own. The officer references the definition of "outdoor caterer" under the Finance Act, 1994, and a judgment by the Allahabad High Court to support this classification.

Authority's Observation:
The authority examines the nature of the services provided and the contractual agreements with clients. They find that the applicant's services align more with canteen services, as they are provided within the premises of the client companies and involve facilities and arrangements typical of a canteen.

Issue 2: Determination of Applicable GST Rates

Applicable Legal Provisions:
- Notification No. 11/2017-Central Tax (Rate): Specifies GST rates for various services, including canteen and outdoor catering services.
- Amendments by Notification No. 46/2017: Modified the GST rates for canteen services.

Applicant's Argument:
The applicant argues that their services should be taxed at 5% under Entry No. 7(i) of Notification No. 11/2017, as amended by Notification No. 46/2017, which includes canteen services.

Concerned Officer's Submission:
The officer maintains that the services should be classified as outdoor catering, attracting an 18% GST rate under Entry No. 7(v).

Authority's Observation:
The authority reviews the amendments and finds that the services provided by the applicant fall under Entry No. 7(i) of Notification No. 11/2017, as amended. The authority notes that the amendments have clarified the classification of canteen services, and the applicant's services align with this classification.

Conclusion:
The authority concludes that the catering services provided by the applicant under both B2B and B2C models should be classified as canteen services under Entry No. 7(i) or (iv) of Notification No. 11/2017, depending on whether the canteen has air-conditioning or central air-heating facilities. As per the amended Notification No. 46/2017, the services fall under Entry No. 7(i), attracting a 5% GST rate.

Order:
The catering services provided by the applicant under both B2B and B2C models are classified as canteen services under Entry No. 7(i) or (iv) of Notification No. 11/2017, depending on the presence of air-conditioning or central air-heating facilities. As per the amended Notification No. 46/2017, these services fall under Entry No. 7(i).