A train is a medium of transport and cannot be termed restaurant, eating joint, mess or canteen, Delhi AAR said in a decision that would impact those supplying food on trains. The ruling comes even as the industry has represented to the government and the GST Council on differential rates on same service leading to issues and potential disputes later.
Outdoor catering attracts 18% GST, while canteen services face 5%. The levy on the supply of food or beverages by facilities such as a mess or canteen was reduced to 5% in November. Subsequently, in January supplies made to Indian Railways were also put in the 5% bracket via a circular.
The circular from Central Board of Indirect Taxes and Customs, announcing lower GST rate for food on trains, did not say whether such transactions shall be treated as a supply of goods or services.
The AAR ruling came in response to an application by Deepak & Co that entered into an agreement with the Indian Railways for a supply of food and beverages (packaged, cooked or at MRP) on mail and express trains.
AAR has observed that supply of food and beverages directly to passengers at a fixed rate on platforms did not have any element of services, and hence GST shall be charged on individual items as per their respective applicable rates, it said.
It also noted that mere heating and cooling of beverages or similar services are incidental and not eligible for any tax benefit.