GST @5% not applicable for the facilities provided in self-owned marriage and party halls

The AAR, Haryana in the matter of M/S. Jewel Classic Hotels Pvt. Ltd. [Advance Ruling No. HAR/HAAR/R/2019-20/23, decided on June 25, 2020] held that the facilities for food catering, banquet etc. provided in self-owned marriage and party halls by separate entities under common ownership is not covered under 'outdoor catering' as per Notification No. 11/2017 Central Tax (Rate), dated June 28, 2017 ('Services Rate Notification') (as amended), which is taxable at the rate of 5%.

Facts

M/S. Jewel Classic Hotels Pvt. Ltd. ('the Applicant') 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 which is 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.

The Applicant regarding tax on supplies, wanted to determine the applicability of the Notification No. 20/2019 Central Tax (Rate), dated September 30, 2019 ('NN. 20/2019') issued, amending Services Rate Notification in which the rate of tax for outdoor catering has been reduced to GST @ 5%.

Issues

• 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 Central Goods and Services Tax Rules, 2017 ('CGST Rules')?
• Whether there is any tax on the supplies arranged from these unregistered people to be paid by the Applicant under the Reverse Charge Mechanism ('RCM') or any other provisions of the Central Goods and Services Tax Act, 2017 ('CGST Act')?
• 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 undervarious notifications?

Held

The AAR, Haryana in Advance Ruling No. HAR/HAAR/R/2019-20/23, decided on June 25, 2020 held as under:

• 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, and therefore, 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 the condition that 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 rule provision 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 Services 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

Serial no. 7 of Services Rate Notification(As amended by NN. 20/2019)

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.'