AAAR Upholds 18% GST on Frutta Services for Corporate Food Supply, Dismisses Appeal for Lower Tax Rate [Read Order]

The Tamil Nadu State Appellate Authority for Advance Ruling (AAAR) upheld the classification of corporate food supply as a "supply of service" taxable at 18%, dismissing the appellant's plea for a lower tax rate applicable to restaurant services.

M/s Frutta Services Private Limited, the Appellant, filed an appeal against Advance Ruling No. 60/ARA/2025 passed by the Authority for Advance Ruling (AAR), Tamil Nadu. The Appellant contested the AAR's decision to classify their activity as a composite supply of service attracting 18% GST.

The Appellant contended that they were mere aggregators facilitating the supply of food from third-party kitchens to corporate clients without cooking or serving the food themselves. They argued that the "dominant intention" of the transaction was the sale of goods, which should be taxable at 5% GST as restaurant service, and that delivery/logistics should be treated as a separate supply. The Appellant claimed the AAR erred by placing undue reliance on contractual clauses regarding quality and delivery, which they argued were merely incidental to the sale of goods.

The Bench of Madan Mohan Singh and S. Nagarajan examined the "Service Agreements" and "Kitchen Agreements" and found that the Appellant was extensively involved in the supply chain, from menu finalization and quality audits to arranging delivery and deploying service personnel for serving. The Authority noted that the Appellant’s claim of being a mere aggregator was dilute, especially given the contractual obligation to deploy serving staff.

The Authority observed that under Para 6(b) of Schedule II of the CGST Act, the supply of food in any manner whatsoever is treated as a supply of service. It was further noted that the activity did not fit the definition of "restaurant service" (as there was no designated premise) or "outdoor catering" (as it was not event-based).

The AAAR observed:

“The activity of supply of food undertaken by the applicant under a contract falls under entry No. 7(vi), being the residual entry, thereby attracting GST at 18%... The appellant's argument that they are mere aggregators of food is not acceptable.”

In view of this, the Appellate Authority upheld the ruling pronounced by the AAR and dismissed the appeal, confirming that the supply is classifiable under SAC 996337 as "other contract food services" liable for 18% GST.

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