Facts of the Case: The appellant, Frutta Services Private Limited, was engaged in supplying food and beverages to corporate clients for distribution to their employees. The appellant contended that it merely functioned as a food aggregator and facilitator and neither cooked nor prepared food on its own. Food items were procured from third-party kitchens and vendors and delivered to corporate premises through logistics arrangements. The appellant entered into “Service Agreements” with corporate clients and separate “Kitchen Agreements” with third-party kitchens.
The appellant sought an advance ruling on whether it could classify its outward supplies as supply of goods/restaurant services taxable at concessional rates while availing input tax credit separately on inward supplies. The Tamil Nadu Authority for Advance Ruling, by Advance Ruling No. 60/ARA/2025 dated 16.12.2025, held that the appellant’s activity constituted a composite supply of service classifiable under SAC 996337 as “contract food services” taxable at 18% under Entry 7(vi) of Notification No. 11/2017-Central Tax (Rate). The AAR further held that the appellant was entitled to avail ITC.
Aggrieved by the ruling, the appellant preferred an appeal before the Tamil Nadu Appellate Authority for Advance Ruling contending that the dominant intention of the transaction was sale of food, that delivery and logistics were incidental activities, and that the supplies should either qualify as restaurant services taxable at 5% or food supplies taxable separately from logistics services.
Issues: Whether the appellant’s activity of procuring food from third-party kitchens and supplying the same to corporate clients constituted a supply of goods/restaurant service or a composite supply of service under GST law. Whether the activity was classifiable as “restaurant service” taxable at 5% GST or as “contract food service” taxable at 18% under Entry 7(vi) of Notification No. 11/2017-Central Tax (Rate). Whether logistics, delivery, quality assurance, hygiene supervision, menu finalisation, and allied obligations were merely incidental to sale of food or formed integral components of a composite supply of service.
Held That: The Authority observed that the appellant was not merely trading in packed food items. The agreements executed with corporate clients and kitchens demonstrated extensive involvement of the appellant in menu planning, coordination with partner kitchens, quality assurance, hygiene monitoring, logistics management, timely delivery, and deployment of service personnel for serving food at client locations. These activities established that the appellant played an active and substantial role in the overall supply chain and service execution.
The Authority further held that paragraph 6(b) of Schedule II to the CGST Act specifically treats supply of food “by way of or as part of any service or in any other manner whatsoever” as supply of service. Therefore, even though food was the dominant element of the transaction, the statute itself classified such activity as a supply of service.
It was held that the appellant’s activity did not satisfy the characteristics of “restaurant service” because the appellant neither operated a restaurant, eating joint, mess, nor canteen premises of its own. The Authority relied upon the statutory explanation in Notification No. 11/2017-Central Tax (Rate), which defines restaurant service as supply of food provided by a restaurant, eating joint, mess, or canteen. Since the appellant functioned through contractual arrangements with corporate clients without operating any such premises, the concessional 5% rate applicable to restaurant services was held to be unavailable.
The Authority also rejected the comparison drawn with electronic commerce operators such as online food delivery platforms. It held that the statutory framework under Section 9(5) of the CGST Act and Notification No. 17/2021 specifically governs notified electronic commerce operators operating through digital platforms, whereas the appellant did not function as an ECO within the meaning of the Act.
The contention based on the dominant intention test laid down in BSNL v. Union of India was also rejected. The Authority held that the dominant supply itself was supply of food services under contractual arrangements and such activity squarely fell within Tariff Heading 996337. Since the service did not fall under any of the concessional categories covered under Entries 7(i) to 7(v), it was correctly classifiable under the residual Entry 7(vi), attracting GST at 18%.
The Appellate Authority upheld the ruling of the AAR and held that the appellant’s activities constituted a composite supply of service classifiable under SAC 996337 as “contract food service” liable to GST at 18%.
Case Name: In re Frutta Services Private Limited dated 08.05.2026
