The Authority for Advance Rulings, West Bengal in the case of M/S. THE TOLLYGUNGE CLUB LIMITED vide Order No. WBAAR 08 of 2024 Order No. 09/WBAAR/2024-25 dated 10.09.2024, has clarifies that if an entity provides a bundled service of renting premises along with catering at non-specified premises, the reduced GST rate of 5% without ITC applies. However, the service rate shifts to 18% with ITC eligibility if the room tariff crosses the ₹7,500 threshold, thus offering flexibility based on the event's timing and facility pricing.

Facts of the Case:  The applicant, a club in Kolkata, seeks a ruling on whether it can qualify its indoor catering services as “outdoor catering” and thereby apply a lower 5% GST rate (without Input Tax Credit or ITC) per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

The Applicant provides services like accommodation, restaurant facilities, and indoor catering, submits that its offerings typically involve the combined supply of renting spaces (for functions and events) and catering services. This combined supply or “composite supply” is intended to be taxed as a single service, depending on whether it is considered “outdoor catering.”

The Applicant argues as under:

• Classifying Indoor Catering as Outdoor Catering: Since the club's catering services are event-based and occasionally provided (e.g., weddings, parties), they should qualify as “outdoor catering,” enabling the club to apply the 5% GST rate.
• Dynamic GST Rate Depending on Room Tariff: The applicant refers to Circular No. 27/01/2018-GST, which permits dynamic tariff rates based on the season. Thus, if the room tariff surpasses ₹7,500, they argue the club should be taxed at 18% with ITC, but at 5% without ITC when the tariff is lower.
• Mandatory GST Rate of 5% Without ITC: Citing the Coffee Day Global Ltd. ruling, they acknowledge that the 5% rate without ITC might be mandatory, similar to restaurant services, with no option for a higher rate with ITC. However, if the club qualifies as a “specified premise” (with a room tariff above ₹7,500), they believe they should apply 18% GST with ITC for that period.

Issue: The questions raised includes:

• Whether catering within club premises qualifies as “outdoor catering,” which would attract 5% GST.
• Applicability of the 5% GST rate without ITC, and whether they are bound to apply it or may instead opt for 18% with ITC.
• Confirmation on the dynamic application of the tax rate depending on room tariffs, citing precedent rulings and GST clarifications for support.

AAR's Observations and Ruling: 

A. Composite Supply of Catering and Renting Services:  

• The Authority analyzed the nature of the applicant’s services, where renting the banquet or lawn is typically combined with catering services at event-based functions, deemed “occasional in nature.”
• The services qualify as “outdoor catering” per the definition in Notification No. 20/2019, involving food and drink supply at event-based indoor or outdoor functions, meeting the criteria for a composite supply.

B. Determination as Composite Supply:

• The Authority noted that the applicant's service bundle (renting of premises along with catering) is “naturally bundled” in the ordinary course of business, referencing the CBEC's 2012 “Education Guide.” This guide outlines that if customers generally expect such services as a package, they are considered naturally bundled.
• As a naturally bundled service, the combined offering is treated as a single supply with the primary service (renting of premises) determining the applicable GST rate.

C. Applicable GST Rate (Conditions and GST Rate Variations):

The ruling refers to the recommendation in the 37th GST Council Meeting's Fitment Committee agenda, which suggested a reduced GST rate of 5% for composite supplies of renting and catering (except when the premises have a daily room tariff of ₹7,500 or more). The applicant's composite supply, provided at premises other than “specified premises” (rooms with tariffs below ₹7,500), is therefore liable for GST at 5% without ITC.