Page 200 - GSTL_3rd September 2020_Vol 40_Part 1

134 GST LAW TIMES [ Vol. 40
14. The tax rates under Sl. No. 7 came under Scrutiny and the same was
taken up by the Council for consideration. Tax Structure of different categories of
Restaurants, with a view to their possible rationalization/reduction was mandat-
ed to be examined. The same was examined at the 23rd Meeting of the GST
Council held on 11th November, 2017. The Council discussed the various aspects
involved in respect of the rate of tax on the supply is reproduced below :
65.28 The Hon’ble Chairperson proposed a tax rate of 18% with input tax
credit on the outdoor catering. The Hon’ble Chief Minister of Puducherry
observed that a tax rate of 18% on outdoor catering was too high. the
Hon’ble Chairperson observed that historically, this was the prevailing rate
of tax on outdoor catering. The Hon’ble Deputy Chief Minister of Delhi
stated that a tax rate of 18% on outdoor catering could lead to tax evasion.
He cautioned that having such big difference of tax rate between restaurant
and outdoor catering, would lead to the practice of issuing bill from the res-
taurant for the outdoor catering and that they had similar experience in
case of differential tax rate on liquor. The Principal Secretary, Finance, Od-
isha proposed a tax rate of 5% without input tax credit for the outdoor ca-
tering. The Hon’ble Minister from Jharkhand stated that many persons car-
ried on only catering business, and for them, rate of tax should be kept at
5% without input tax credit. He added that many outdoor caterers did only
dry catering, that is, provided labour while the food, etc. was bought by the
customer. Advisor, Finance, Punjab also supported this suggestion. He stat-
ed that several people only did catering business and theoretically, they
could claim that they had set up a restaurant to cater to a function at a ven-
ue. He suggested that rate of tax for outdoor catering where only food was
being provided should be kept at 5%. The Hon’ble Chairperson observed
that low rate of tax for one sector would lead to demand for lowering tax
for other services sector also. The Hon’ble Minister from Uttar Pradesh
proposed to keep a uniform tax rate of 12% without input tax credit as it
would be bad optics to charge tax at the rate of 18% on outdoor catering
and 5% on restaurant. The Secretary stated that this proposal would not be
acceptable to the trade. The Hon’ble Minister from Assam did not support
this proposal and stated that this would lead to increase in prices.
65.29 Keeping in view the discussion as above, the Council agreed to ap-
ply tax rate of 5% tax without input tax credit on all standalone restaurants
and a rate of tax of 18% with input tax credit on a restaurant in a hotel hav-
ing room of declared tariff of more than Rs. 7,500 per night. The take away
food from a restaurant shall have similar tax treatment as that for the res-
taurant. Outdoor catering shall, however, attract tax at the rate of 18% with
input tax credit and there would be no change in Composition scheme for
restaurant.
15. Accordingly, Notification No. 11/2017-State Tax (Rate), issued in
G.O.Ms No. 110, Revenue (CT-II) Department, dated 29-6-2017 was amended
vide Notification No. 46/2017-State Tax (Rate), issued in G.O.Ms No. 280, Reve-
nue (CT-II) Department, dated 12-12-2017 as mentioned below :
(ii) against serial number 7, -
(a) for item (i) in column (3) and the entries relating thereto in
columns (3), (4) and (5), the following shall be substituted,
namely :-

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