Service of supplying food to the employees of the unit located in the SEZ is not covered under the zero rated supplies

Service of supplying food to the employees of the unit located in the SEZ is not covered under the zero rated supplies : The Appellate Authority for Advance Ruling Maharashtra in matter ofMerit Hospitality Services Pvt. Ltd. held that the services of supplying food by the appellant to the employees of the unit located in the Special Economic Zone is not covered under the zero rated supplies in terms of Section 16(1)(b) of the IGST Act, 2017 and the services of the appellant are also not in the nature of restaurant services in SEZ as claimed by the appellant.

Service of supplying food to the employees of the unit located in the SEZ is not covered under the zero rated supplies

Below is the Extract of the Advance Ruling Discussions and findings 7. Heard the appellant's arguments, wherein they intend to contend the ruling pronounced by the Appellate Advance Ruling Authority in respect of the question pertaining to case IV only. Hence, the moot issue before us is to decide whether the activities undertaken or proposed to be undertaken of the appellant by way of supply of food or drinks or any articles for human consumption to the employees of the company, located in the Special Economic Zone is covered under the zero rated supply or otherwise. 8. First, we will discuss the "zero rated supply", as provided under Section 16(1) of the IGST Act, 2017, which is reproduced herein below: Section 16(1) "Zero rated supply" means any of the following supplies of goods or services or both, namely :- (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit . 9. Thus from the above pro vision, it is crystal clear that the supply made by the appellant to the employees of the unit located in SEZ cannot be construed as zero rated suppl y by any stretch of imagination, as the employees can neither be treated as SEZ developer nor as SEZ unit. Accordingly , GST will be applicable as per the classification of the services determined in terms of the scheme of the classification of services as provided under Annexure A to the Notification 11/ 2017 -C.T. (Rate) dated 28.06.2017 as amended by the Notification No. 46/2017-C.T. (Rate) dated 14.11.2017. 10. As regards the question pertaining to the case IV of the appeal/application, wherein the appellant has claimed that since it is running a restaurant in the SEZ area, the applicable rate of GST will be 5%, it is observed that question raised in the application is not relevant and lacks rational in as much as the appellant is presuming and is putting pre-emptive notion before the Appellate Authority as to they are running the restaurant in the SEZ area and then asking authority to decide upon the GST rate applicable on such activities. To answer this question, first we would like to discuss the meaning of the "Restaurant". "Restaurant" is not defined under the GST Act. Therefore, we will understand the meaning of Restaurant as provided in the Cambridge Dictionary. As per the Cambridge Dictionary, Restaurant is a place where meals are prepared and served to the customer. Now, on perusal of the submissions made by the appellant on 01.10.2018, wherein they have categorically submitted that they are registered as "Outdoor Caterers" and are basically engaged in providing the corporate catering services to their offices /units as per the terms and conditions of the contracts entered with them. They further submitted that they prepare the food in their own kitchen and then distribute it to various companies at different locations. 11. From the foregoing, it is apparent that the food is being cooked at one place and being distributed to the various different locations of the companies with whom they have entered into contract. Thus, this event is not covered under the definition of the "Restaurant services" as discussed above.Thus, the appellant claim in the case IV that it is running Restaurant Services in the SEZ area is not tenable and hence the GST rate of 5% as envisaged by the appellant is not correct. In view of the above discussion and findings, we pass the following order:-

Order

The services of supplying food by the appellant to the employees of the unit located in the Special Economic Zone is not covered under the zero rated supplies in terms of Section 16(1)(b) of the IGST Act, 2017 and the services of the appellant are also not in the nature of restaurant services as claimed by the appellant.

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