Catering services at office canteens to attract 18% GST: All you need to know

Catering Services to offices, industry canteens will now attract 18 per cent GST.   |  Photo Credit: BCCL

New Delhi: In what seems to be another blow to the middle-income group or the salaried class, the Gujarat Authority for Advance Ruling (AAR) said that catering services at office or factory canteens will now attract 18 per cent GST instead of 5 per cent, which was the rate at which the industry was operating, reported The Economic Times. Primarily, it will affect canteen services at offices and industry canteens after the AAR suggested 18 per cent GST on the service.

According to the ET report, the case was transferred to the AAR after canteen service provider Rashmi Hospitality Services Private Limited charged 18 per cent GST on the services offered by them, under the ‘outdoor catering service’ norm.  

While the move was protested against by customers, who asked the canteen providers to charge 5 per cent as the services were related to supply of food and beverages. The main dispute in the case was related to whether the services offered were liable to attract 18 per cent GST under catering services or 5 per cent under canteen services.  

After much deliberation, the AAR came to a conclusion that there is no term defined as ‘outdoor catering’ under the GST norm. Thus, the AAR cited a judgement of the Allahabad High Court from the earlier service tax regime and made some crucial points, suggesting that the services cannot be considered as mere canteen services.  

The AAR concluded that the catering services that are provided to offices or any other industry such as factories are not canteen services as the space is provided by the office and not the caterers.

It went on to suggest that any meal consumed by the workers or employees of the organisation does not change the nature of the services provided by the caterers. Hence, catering services to office or factory canteens will now accompany as 18 per cent GST charge. In view of the above arguments, the services provided by an applicant would be categorised as ‘outdoor catering’ and would be taxable at 18% GST.