AAR Rules Outdoor Catering Services Taxable at 5% : Rules Activity is Composite Suppl u/s 98(4) of CGST/TNGST Acts [Read Order]

Invoking its powers under Section 98(4) of the Central Goods and Services Act (CGST) and Tamil Nadu Goods and Services Tax(TNGST) Acts, the Tamil Nadu Authority forAdvance Ruling (AAR) has held that outdoor catering services provided by the applicant constitute a composite supply of service, thereby attracting GST at 5% (2.5% CGST + 2.5% SGST).

The applicant Friends Catering CBE sought clarity on whether it could opt between the concessional 5% rate without ITC under Entry 7(iv) of Notification No. 11/2017‑CT(Rate) and the standard 18% rate with ITC under Entry 7(vi).

Friends Catering explained that it operates under two models, one involving composite outdoor catering with food preparation, transport, and on‑site serving by its staff, and another limited to food supply for occasional events, where food is prepared at its premises and delivered to the client’s location without any manpower or service component.

During the hearing, the applicant’s representative clarified that the firm does not provide hotel accommodation and is not located in any “specified premises.” The AAR examined both models and found that each constitutes a composite supply of service under Schedule II of the CGST Act, since food preparation and delivery are naturally bundled activities.

The bench, comprising  C. Thiyagarajan (CGST) and  B. Suseel Kumar (SGST), observed that the services fall squarely under Service Accounting Code 996334, covering “Catering services in exhibition halls, events, marriage halls and other outdoor/indoor functions.”

Referring to the amended notification, the AAR ruled that Entry 7(iv) prescribing 5% GST without ITC is mandatory for outdoor catering services provided at premises other than specified ones. The authority rejected the applicant’s interpretation that it could alternatively opt for the 18% rate under Entry 7(vi), noting that the latter applies only to accommodation, food, and beverage services other than those covered under Entries (i) to (v).

Accordingly, the AAR concluded that Friends Catering CBE must charge 5% GST on its outdoor catering services and cannot choose the 18% rate with ITC.

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