The Haryana Authority for Advance Ruling (AAR) in its recent ruling in the case of M/s Jewel Classic Hotels Pvt. Ltd has inter alia held that catering of food, banquet facilities, and combination of both (as per the requirement of the customers) in self-owned marriage and party halls is not covered under ‘outdoor catering’ as per Notification No. 11/2017 Central Tax (Rate), dated 28th June, 2017 (as amended), and thus in such cases, the GST rate of 5% is not applicable.
Facts of the case:
- The applicant M/s Jewel Classic Hotels Pvt. Ltd. is running three separate units at three separate locations, having separate management, i.e. all operations, sales, accounting are being done separately by each separate team.
- The Applicant has two separate existing Hotel units (Hotel Jewels and Hotel Noor Mahal) and recently started a new unit namely Hazuri Bagh, a party lawn to organize marriage functions, exhibitions or other events. Hazauri Bagh, will take outdoor catering services from Hotel Jewels (a separate unit, in which no ‘hotel accommodation’ is more than INR 7500/- per unit per day).
- The Applicant conducts various parties, marriages and other events in all three units. In these marriages/events in addition of renting of premises & supplying food/beverages the customers can demand some additional arrangements from the Applicant such as flower decoration, orchestra, music DJ, dance floor; special cutlery for serving food; electronic & electric items, such as television for podcasting, projectors, heaters in winter etc.; arrangement of food or beverages from specific vendors etc and any other requirement of the customer.
Issue on which Ruling was sought:
- Whether catering of food, banquet facilities and combination of both (as per requirement of the customers) in self-owned marriage and party halls by the Applicant (having all rooms below INR 7,500/-) is covered in Outdoor Catering taxable @5%?
- Whether the Applicant is eligible to charge 5% tax for providing outdoor catering at Hazuri Bagh?
- Whether the additional arrangements (in addition to foods, beverages & renting of premises), provided as ‘pure agent’ will be excluded from value of supply as given in Rule 33 of the CGST Rules,2017?
- Whether there is any tax on the supplies arranged from these unregistered people to be paid by the Applicant under the Reverse Charge Mechanism or any other provisions of the CGST Act, 2017?
- Whether the extra bed forms part of the room tariff and is liable to be charged as per various rates prescribed as per slabs given under various notifications?
Order of Haryana AAR:
- There is a condition in Serial No. 7(iv) in Column 3 of Services Rate Notification, that the supply of outdoor catering should not be provided by such suppliers who are providing ‘hotel accommodation’ at ‘specified premises’. In the present case, the Applicant is providing hotel accommodation at Noor Mahal which is a specified premise. Thus, the Applicant does not fulfill the condition.
- It is clear that outdoor catering activity carried by the Applicant at its own Marriage Hall and Party Hall including outdoor lawns on the same registered premises of principal place or additional declared place does not fall under the ambit of ‘outdoor catering’ and therefore not taxable @5%.
- Further, as Hazuri Bagh is situated in precincts of Hotel Noor Mahal, so it the clear that the Applicant is not satisfying condition no. 1 of N.N 20/2019 i,e the supply of outdoor catering should be at such premises which should not be specified premises. Therefore, the Applicant is not entitled GST @ 5% from the business premises of Hotel Noor Mahal/Hazuri Bagh.
- As per valuation rules of CGST Act, the Applicant does not satisfy the condition of the pure agent which is to recover from recipient only such amount as has been paid by him to the third party. Facilitation charges collected shall disqualify the Applicant from being pure agent.
- The provisions of Section 9(4) of the CGST Act are not applicable to all registered persons and goods & services. It is applicable only to selected categories of registered persons & goods and services which have been notified by the government. It is clear that presently reverse charge mechanism under Section 9(4) of the CGST Act is not applicable on the Applicant. Tax on the supplies arranged from the unregistered people is not required to be paid by the Applicant under the RCM until further notification is issued by the government in this regard which is applicable on the Applicant.
- The charges of extra bedding if exceeds the room tariff as per GST Rate Notification, the same shall be treated as gross value of supply and the tax shall be charged as per the amount including the extra bedding charges as it is a part of room tariff. The value of extra bed forms part of the value of supply and liable to be charged GST accordingly.
Relevant Provisions at a glance:
For helping our readers in understanding the above ruling, the relevant provisions of GST law are given below:
Serial no. 7 of Notification No. 11/2017 Central Tax (Rate), dated 28th June, 2017 (As amended by NN. 20/2019):
| Sl No. | Heading | Description of Service | Rate | Condition |
| (1) | (2) | (3) | (4) | (5) |
| 7 | Heading 9963(Accommodation, food and beverage services) | (i) Supply of ‘hotel accommodation’ having value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent. | 6 | – |
| (iv) Supply of ‘outdoor catering’, at premises other than ‘specified premises’ provided by any person other than- (a) suppliers providing ‘hotel accommodation’ at ‘specified premises’, or (b) suppliers located in ‘specified premises’. | 2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)] |
Clause 2(xxxvi), (xxxiii) and (xxxiv) of Services Rate Notification:
“(xxxiii) ‘Outdoor catering’ means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.
(xxxiv) ‘Hotel accommodation’ means supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation.
(xxxvi) ‘Specified premises’ means premises providing ‘hotel accommodation’ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”
Also Read: GST Portal: New Functionalities in regard to GST Registration and Returns
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
