TMI Blog2018 (7) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... e of services by a restaurant, eating joint including mess and canteen - with the progress of time and civilization and further increasing demands and expectations from restaurants by customers and also the restaurants with intent to further grow their businesses have started providing "take away" or even "home delivery" services to customers as per their instant order out of the items that are there in the menu of the restaurants. However a special feature to be noted is that in such cases there is no pre-entered agreement or contract between the restaurant or customers except for the expectations which the customer has as per reputation about food and services of the restaurant - the services being provided by the applicant would not fall under restaurant service. The applicant himself has stated that they are registered as outdoor caterers under the GST Act and that 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 - the service being provided by the company would clearly fall under Group 99633 - Food, edible preparations, alcoholic and non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of Approval of the Development Commissioner as per Section 15(9) of the SEZ Act - In the case details provided by the applicant in Case IV, it is not forthcoming whether 'B Ltd' is an authorized unit in SEZ as per Section 15 (9) of the SEZ Act and as to what are the authorized operations of 'B Ltd' in SEZ and whether supply of food to B Ltd or its employees is covered under authorized operations as allowed/approved by the Development Commissioner. If it is not covered under authorized operations then this supply of food by the applicant to SEZ employees would not be eligible for the benefit of zero rated supply. Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? - Held that:- It is clear that the applicant cannot claim that they are running a canteen in SEZ. Rather their service would be in the nature of outdoor catering service. Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only? - Held that:- The applicant cannot claim that they are running a restaurant in SEZ. Rather their service would fall under outdoor catering service. - Advance Ruling NO.GST-ARA-22/2017-18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the above activity be called as canteen activity and the applicable rate of 5% be charged on our bills ? M/s Colgate Global Business services Pvt. Ltd. As per entry No. 7(i) of notification No. 46/2017- CT (Rate) Dt. 14.11.2017. (i) Supply, by way of or as part of any services or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, The agreement made with Colgate Global Business services Pvt. Ltd. clearly mentions that the arrangement is on principal to principal basis and payment to be made by company directly to the contractor as per annexure B of the agreement. Further it mentions that contractor has agreed to provide catering services to the company at the canteen premises of L T business park. Further there is no relevance of employees (who are ultimate beneficiary of the catering services) with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice and staff cafeteria in the office premises of UBS Though the supply is made to the SEZ area, same is not relevant with the purpose of the SEZ. Further it can not be treated as restaurant in SEZ area. Hence, the GST will be applicable at rate of 9% each under CGST SGST. 04. HEARING The case was taken up for hearing on dt.28.02.2018 when Sh. Vijay Kulkarni, Consultant along with Sh. Vivek Tamhane, Chartered Accountant, appeared and reiterated the contention as made in the written submission. They were requested to provide specific copies of contracts under which they were undertaking tine activities of supply of goods and services. During final hearing on dt.27.03.2018, both the aforenamed persons attended and made further submissions and requested that the issue be decided on the basis of the written submissions. They were again requested to submit specific copies in respect of different agreements as referred to in the questions in their application. Jurisdictional Officer, Sh. J. P. Sakore, Dy. Commissioner GST(E-639) , LTU 4, Mumbai was present during both the hearings and has furnished a written submission in the matter. 05. OBSERVATIONS We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic liquor for human consumption. 6 - (ii) Accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of a unit of accommodation of one thousand rupees and above but less than two thousand five hundred rupees per unit per day or equivalent. Explanation. - declared tariff includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. 6 - (iii) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, having licence or permit or by whatever name called to serve alcoholic liquor for human consumption. 9 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand and five hundred rupees and above per unit per day or equivalent. Explanation.- declared tariff includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. 14 - (ix) Accommodation, food and beverage services other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) above. 9 - We find that under this Notification after amendments uptill now GST @ 5% is chargeable in case of services by a restaurant, eating joint including mess and canteen as per relevant entry produced above. In order to ascertain whether the activities of the applicant would fall under Sr. No. 7, Heading 9963(i) of the above referred Notification, we would be required to examine as to what a restaurant, eating joint, mess and canteen are. We find that restaurant , as per Cambridge English Dictionary is : a place where meals are prepared and served to customers . A place of business where people can cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l establishment. We find that every industrial establishment aims to gain maximum profit at minimum costs through a loyal and cooperative workforce and for this it tries to provide a comfortable, convenient and pleasant environment to its employees. For this the employer under Staff Welfare provides various benefits and facilities to the employees. One of such facilities provided is canteen facilities , which is also a statutory requirement as per Factories Act, if the total number of employees is more than as given under statutory rules and provisions. We find that as per general understanding, the core activity in an industrial canteen is cooking of items of food in kitchen and serving them fresh and hot to the consumers in the dining hall or its service area. The main features that are generally seen in the industrial canteen are as under:- (1) Industrial canteen is inside the premises of the establishment. (2) Generally the canteen building have cooking facilities inside it and mostly facilities such as empty LPG cylinder, furniture, refrigerator, water cooler, cooking and serving utensils etc. being all or some of these items are provided by the company on retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the details as per Case-I submitted by the applicant in his Advance Ruling application are not in complete congruence with the details as visible in the agreement referred above and in view of this we will take up the issue for decision taking into consideration the facts and details as submitted by the applicant as per Case-I in the application and not as per claimed representative contract as submitted. We find that in Case-I, the applicant has given the case details as under:- 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 situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is done by the applicant directly to M/s A Ltd. on monthly basis and the payment is received from M/s A Ltd. as per contract. Thus as per the above details and discussions it is clearly visible that the service being provided by the applicant would not be covered under Serial No. 7 Heading 9963 (i) of Notification No. 11/2017 as amended. Now as we find that the services of the applicant are not covered under the above entry of Notification No. 11/2017 where the applicable rate of tax is 5%, therefore we are required to ascertain as to where the service being provided by the applicant would fall and what would be the tax rate applicable to them. In view of this now we examine the definition of caterer and outdoor caterer and see if the services being provided by the applicant merit classification under this service and would be liable to tax accordingly. We find that under the service tax law the definition of 'caterer' and 'outdoor caterer' was given and the same can be construed to be the definition of 'caterer' and 'outdoor caterer' as per general perception as well and can accordingly be discussed and deliberated upon in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial location/s specified by the customer other than for transportation companies, on an ongoing basis; food service concession services, i.e. the provision of operating services by operators of eating facilities such as canteens and cafeterias]. In view of the above classification of the services being provided by the applicant as per Case-I details would be taxable under Serial No. 7 Heading 9963 (v) @ 18% under GST as applicable. 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. be called as canteen services and applicable rate of 5% be charged on our bills? In view of the detailed discussions in respect of Case-I above, the undertaking of additional responsibility of services of distribution of food by the applicant would in no way impact the classification or taxability of the services b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer. A Co-Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3. SEZ UNIT :- Unit means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act. Further we find that apart from an existing unit, a unit established in compliance of procedure prescribed in Section 15 of the SEZ Act, 2015 can be called a SEZ unit. Section 15 of the SEZ Act, 2005 is reproduced as under:- 15. (1) Any person, who intends to set up a Unit for carrying on the authorised operations in a Special Economic Zone, may submit a proposal to the Development Commissioner concerned in such form and manner containing such particulars as may be prescribed: Provided that an existing Unit shall be deemed to have been set up in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etailed provisions of Section 16 of the IGST Act and Section 15(1) to 15(9) of the SEZ Act, we find that the benefit of zero rated supply to domestic unit will be allowable only if the supply of goods or services are to a SEZ unit and the SEZ unit is granted a Letter of Approval by the Development Commissioner and the unit is undertaking only such operations which the Development Commissioner has authorized and every such authorized operations are to be mentioned in the letter of approval of the Development Commissioner as per the provisions of Section 15 (9) of the SEZ Act. Thus it is clear that the benefit of zero rated supply would be allowed to a domestic unit only if supply of goods or services to a SEZ unit or developer is only in respect of authorized operations as mentioned in the Letter of Approval of the Development Commissioner as per Section 15(9) of the SEZ Act. However in the case details provided by the applicant in Case IV, it is not forthcoming whether 'B Ltd' is an authorized unit in SEZ as per Section 15 (9) of the SEZ Act and as to what are the authorized operations of 'B Ltd' in SEZ and whether supply of food to B Ltd or its employees is c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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