The Authority for Advance Rulings (AAR) announces through a government circular that supply of food and beverages in trains will face goods and services tax as applicable on such items, and not the concessional rate of 5%.
The ruling comes after the Indian Railways food supply tax was put under the 5% bracket, in January, via a circular. The 5% bracket is reserved for supply of food or beverages by facilities such as a mess or canteen, while all other outdoor catering attracts 18% GST. The circular from Central Board of Indirect Taxes and Customs, announcing lower GST rate for food on trains, however, did not say whether such transactions shall be treated as supply of goods or services.
AAR has now observed that supply of food and beverages directly to passengers at fixed rate on platforms did not have any element of services, and hence GST shall be charged on individual items as per their respective applicable rates.
It has also noted that mere heating and cooling of beverages or similar services are incidental and not eligible for any tax benefit.