GST Updates

Taxability of Supply of Food by Education Institution to its Students or by a person other than Educational Institution to its Students

Circular No. 85/2019 has been issued by CBIC on 1st January 2019 to clarify the leviability of tax on supply of foods made by Educational Institutions to its students and by a person other than educational Institution to the students at a canteen or a mess in the Educational Institution. Further amendment has been carried out in Explanation-1 to Entry 7(i) of Notification No. 11/2017-Central Tax Rate vide Notification No. 27/2018-Central Tax Rate dated 31st December 2018. The impact of the circular and the amendment is being analyzed as follows:

 

  1. Need for amendment and clarification: The need of the circular and amendment to the Notification No. 11/2017 had arisen due to the Explanation-1 to Entry 7(i), which prior to amendment made on 31st December 2018 vide Notification No. 27/2018-Central Tax Rate provided that “This item includes such supply 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 a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional.” would be taxable at the rate of 5% whereas as per entry No. 66 of Notification No. 12/2017-Central Tax Rate “Supply of all services by an educational institution to its students, faculty and staff” was exempted from levy of tax. Therefore, there was confusion that whether supply of food by educational institution to its students would be taxable at 5%.

 

  1. Taxability subsequent to Amendment vide Notification No. 27/2018 dated 31st December 2018: The words “school, college” in Explanation-1 to Entry No. 7(i) of Notification No. 11/2017-Central Tax Rate have been omitted to remove the ambiguity. Therefore, the taxability for supply of foods by educational Institution or by a person other than the educational Institution to the students would be as follows:

 

  • Supply of Food by Education Institution to its Students: Supply of food and beverages by an educational institution to its students, faculty and staff, where such supply is made by the educational institution itself, would be exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, vide Sl. No. 66 w.e.f. 01-07-2017.

 

  • Supply of Food by a Caterer to the Students of the Educational Institution: Supply of food and beverages by any person other than the educational institutions based on a contractual arrangement with such institution at the space of the institution would be leviable to GST@ 5% vide Entry No. 7(i) of Notification No. 11/2017-Central Tax

 

  1. Taxability prior to Amendment vide Notification No. 27/2018 dated 31st December 2018: For the period prior to the amendment, it has been clarified in Circular No. 85/2019 dated 1st January 2019 that a supply which is specifically covered by any entry of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 would be exempt from GST notwithstanding the fact that GST rate has been prescribed for the same under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

 

Therefore, for the period prior to the amendment to the notification as well, supply of food by educational institution to its students would be exempt under entry No. 66 of Notification No. 12/2017 and supply of food to Students by person other than educational institution based on a contractual arrangement with such institution and at the space of the institution would be taxable at the rate of 5% vide Entry 7(i) of Notification No. 11/2017-Central Tax Rate.

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