Gst Rate On Food And Beverage

In spite of crossing a year milestone, there are continues amendments in the

Goods and Service Tax law. Further, in order to clarify various situations, the Government comes up with the clarification every now and then. Recently due to the two self-contradictory notifications, there was a lot of confusion with regard to the taxability of the supply of food and beverage by an educational institution to its students. The Central Board of Indirect Tax and Customs came up with a clarification, to clear up the contraction, by issuing circular no. 85/04/2019-GST dated 1st January 2019. The said confusion and subsequent clarification are being highlighted in the present article. Know more about 1

Self-Contradictory Notifications

The confusion emerged with the substitution of sr. no. 7 of notification no. 11/2017 dated 28

th June 2017 and the said substitution was done by notification no. 13/2018-Central Tax (Rate) dated 26th July 2018. The newly substituted sr. no. 7 came into effect from 27th July 2018. The relevant portion of the substituted sr. no. 7 is being reproduced hereunder for better understanding and ready reference –

“(i) ……………………….. Explanation 1 - This item includes such supply done at a canteen, mess, cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on the contractual arrangement with such institution for such supply, provided that such supply is not an event-based or occasional. Explanation 2.- ….. Explanation 3.-…..

2.5

Provided that the credit of the input tax charged on goods and services which is used in supplying the service has not been taken

On a bare reading of the above explanation, it clearly provides that any supply of food and beverages served by the institution or by any other person based on a contractual arrangement with such institution are covered within the said explanation and hence are liable to GST @5% (2.5%

CGST and 2.5% SGST). Contradicting the above taxability, as per notification no. 12/2017-Central Tax (Rate) dated 28th June 2017, the following exemption is available to an ‘educational institution’ –

Sr. No.	Heading	Rate
66	Services provided – (a) by an ‘educational institution’ to its students, faculty and staff	NIL

Going through the above exemption notification, it clearly states that any services provided by an educational institution to its students, staff and faculty are chargeable to NIL rate of GST. It must, however, be noted here that all the institution are not necessarily covered/classified as ‘educational institution’. In order to get covered within the scope of the educational institution, and claim the above exemption, one needs to be covered within the definition of the same provided at entry no. 2 (y) of notification no. 12/2017- Central Tax (Rate).

Board’s Clarification

Explanation 1 to entry 7 (i) of notification no. 11/2017-Central Tax (Rate) dated 28

th June 2017 and exemption available at sr. no. 66 of notification 12/2017-Central Tax (Rate) dated 28th June 2017 was the base for the emergence of doubt, as to whether the ‘educational institution’ is also liable to pay GST on foods and drinks being served to their students, and the same was clarified by the board which is being explained hereunder –

CBIC Clarification

Circular no. 85/04/2019-GST dated 1

st January 2019 issued by the Central Board of Indirect Tax and Customs, clarifying the above conflicts, states that notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 provides the GST rates on services and the same needs to be read along with the exemption entries contained in notification no. 12/2017- Central Tax (Rate) dated 28.06.2017. Being more specific, it has been clarified by the board that the supply which is specifically covered within the entries of the exemption notification no. 12/2017- Central Tax (Rate) is exempt from the levy of GST notwithstanding the fact that the GST rates have been prescribed for the same services under notification no. 11/2017- Central Tax (Rate).

Amendments to Overcome the Conflict

In order to remove all the doubts in the matter, the board has undertaken amendments and the same is tabulated hereunder for easy understanding –

Old Notification No.	New Notification	Effective Amendment
13/2018- Central Tax (Rate) dated 26th July 2018	27/2018- Central Tax (Rate) dated 31st December 2018	Words School, college were omitted.
12/2017- Central Tax (Rate) dated 28th June 2017	28/2018- Central Tax (Rate) dated 31st December 2018	Heading 9963 has been added to sr. no. 66

Back to Learn

Frequently Asked Questions

Common questions about GST Rate on Food and Beverage Services by Educational Institutions.

The confusion arose due to two seemingly contradictory notifications – one notification (No. 11/2017) stated that the supply of food and beverages by educational institutions to their students would attract 5% GST, while another notification (No. 12/2017) exempted services provided by educational institutions to their students from GST.

The CBIC clarified through Circular No. 85/04/2019-GST that the exemption entries in Notification No. 12/2017 would prevail over the GST rates specified in Notification No. 11/2017. This meant that the supply of food and beverages by educational institutions to their students would be exempt from GST.

To remove any doubts, the CBIC amended Notification No. 13/2018 by issuing Notification No. 27/2018, omitting the words "school" and "college" from the explanation. Additionally, Notification No. 12/2017 was amended by Notification No. 28/2018, adding Heading 9963 to serial no. 66 to specifically cover the supply of services by educational institutions to their students.

After the clarification and amendments, the supply of food and beverages by educational institutions to their students is exempt from GST, i.e., the GST rate is nil.

No, not all institutions are automatically classified as 'educational institutions' for the purpose of this GST exemption. To be covered under the definition of 'educational institution' and claim the exemption, an institution needs to meet the criteria specified in Entry No. 2(y) of Notification No. 12/2017-Central Tax (Rate).

No, the GST exemption is applicable only when the supply of food and beverages is made directly by the educational institution to its students. If the supply is made by any other person based on a contractual arrangement with the educational institution, it would be subject to 5% GST as per Explanation 1 to Entry 7(i) of Notification No. 11/2017.

No, as per the proviso to Explanation 1 to Entry 7(i) of Notification No. 11/2017, the input tax credit cannot be availed for the GST paid on goods and services used in supplying the exempt service of food and beverages by educational institutions to their students.

The CBIC clarified that the specific exemption entries in Notification No. 12/2017-Central Tax (Rate) take precedence over the GST rates prescribed in Notification No. 11/2017-Central Tax (Rate). This means that if a supply is specifically covered under the exemption notification, it will be exempt from GST, regardless of the GST rates specified for that supply in the rate notification.

When there are conflicts or contradictions in GST notifications, the CBIC addresses them by issuing clarifications or circulars. In this case, the CBIC issued Circular No. 85/04/2019-GST to clarify the confusion and subsequently amended the relevant notifications to remove any doubts.

Staying updated with GST notifications, clarifications, and amendments is crucial for businesses and educational institutions to ensure compliance with the GST laws and avoid any penalties or legal issues. It also helps in understanding the correct GST treatment for various supplies and claiming appropriate input tax credits.