No ITC Allowed on Catering Services Taxed at 5% GST, AAR Rules

M/s. Friends Catering CBE, engaged in outdoor catering services, provided two types of supplies: first, composite catering involving preparation of food along with manpower for serving and event support; and second, supply of prepared food from its premises delivered to customers for events without any on-site services. The applicant did not operate from specified premises and did not provide hotel accommodation. It sought clarity on the applicable GST rate, the availability of the ITC option, and the correct HSN classification for both models.

Central Issue: Whether the applicant has an option to pay GST at either 5% without ITC or 18% with ITC for outdoor catering services, and the applicable GST rate and HSN code for both supply models ?

Tribunal’s Decision: The Authority held that both models of supply qualify as “composite supply” of service under Schedule II, as they involve the supply of food as part of the service. The activity is classifiable under SAC 996334 (outdoor catering services). It ruled that such services fall under Entry 7(iv) of Notification No. 11/2017-CT (Rate), attracting GST at 5% (2.5% CGST + 2.5% SGST) subject to the condition that input tax credit is not availed.

The Authority rejected the applicant’s contention of opting for 18% GST with ITC, clarifying that the 5% rate is mandatory for such supplies and the higher rate under Entry 7(vi) is not applicable. This position holds true even where only food is supplied without labour or on-site services.

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