The GST Council has, finally cleared the ambiguities over the taxability of outdoor catering services. The 28th meeting of the GST Council has decided to rationalize entry relating to composite supply of food and drinks in restaurant, mess, canteen, eating joints and such supplies to institutions (educational, office, factory, hospital) on contractual basis at GST rate of 5%. The Council made it clear that the scope of outdoor catering under 7(v) is restricted to supplies in case of outdoor/indoor functions that are event based and occasional in nature.
Presently, 18 percent tax rate applicable to outdoor catering services. For canteen and restaurant services, it is five per cent without input tax credit. There were certain ambiguities over the rate of tax applicable to food supplied to canteens through third-party catering. Due to this, the suppliers were charging different rates on the said services.
A bunch of rulings by the State Advance Ruling Authorities (AARs) had created a confusion in the minds of the taxpayers with a finding that such supplies shall be subject to highest rate of tax.
The Delhi AAR stated that the supply of food and beverages in trains would attract eighteen percent tax and not the concessional rate of 5%.
Gujarat AAR also held that the supply of food services to canteens at industries and offices constitute ‘outdoor catering’ taxable at 18 percent GST.
Also, the Kerala AAR has ruled that the cost recovered from employees, by the employer, towards using the canteen facility provided by the employer is a “supply” and hence liable to GST.
Now the issue has been settled as the most powerful GST Council has clarified that the composite supply of food and drinks in restaurant, mess, canteen, eating joints and such supplies to institutions (educational, office, factory, hospital) on contractual basis at GST rate of 5%.
