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13/2018-Central Tax (Rate) ,dt. 26-07-2018

Seeks to amend notification No. 11/2017- Central Tax (Rate) so as to notify CGST rates of various services as recommended by Goods and Services Tax Council in its 28th meeting held on 21.07.2018.

To view this notification click here.

Opinion

Earlier the standalone restaurants/canteen/mess may have the option either to pay GST at the rate of 5% without facility of input tax credit or pay 18% with facility of input tax credit. Vide this notification, the rate of the Supply of Canteen Services/Mess/cafeteria provided at office/ institution/school/college/hospital/industrial unit has been prescribed as 2.5% CGST & SGST each provided that credit of input tax charged on goods and services used in supplying the service has not been availed. Thus 5% tax on the service provided by the assessees to the employees is payable if we are providing the canteen services to the employees and we are charging some amount from them. Therefore, the assessee will have to bear overall burden of 10% (5% + 5%) tax rate as the person who supplies services at canteen by way of contractual arrangement with the assessee will also charge @ 5% tax on his services provided to the assessee. Further, no ITC will be available on it.
This is with reference to applicability of GST on the canteen services provided to the employees by M/s X Ltd. We submit that GST is payable by M/s X Ltd. on canteen services provided to its employees because as per Explanation to section 15, persons shall be deemed to be related if such persons are employer and employee. Furthermore, as per Schedule I, supply of goods or services or both between related persons is supply even if made without consideration. Consequently, GST is payable on the canteen services provided by M/s X Ltd. to its employees. Vide this notification; the rate on such services has been notified as 2.5%.
An explanation has been added for the inclusion of supply made at canteen, mess, cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional. Hence, the Person who is providing such Catering Services to M/s X Ltd. will charge tax @ 5% and M/s X Ltd. will also charge Tax @ 5% from its employees on the amount charged from them and it cannot claim credit for either of them.

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