GST and Tax update

GST CASE LAWS 18.06.2026

CA Satbir Singh — Sat, 20 Jun 2026 13:05:57 +0000

GST CASE LAWS 18.06.2026

Relevant Act	Section	Case Law Title	Brief Summary	Citation
Central Goods and Services Tax Act, 2017	Section 8	Friends Catering CBE, In re	Food supply for occasional events (with or without on-site service) is a naturally bundled composite supply and must be treated as a supply of service.	Click Here
Central Goods and Services Tax Act, 2017	Section 9	Friends Catering CBE, In re	Food supply at marriage/exhibition halls qualifies as outdoor catering (SAC 996334), taxable at 5% GST without ITC under Entry 7(iv); the taxpayer cannot opt for residual Entry 7(vi) at 18% with ITC.	Click Here
Central Goods and Services Tax Act, 2017	Section 9	Frutta Services (P.) Ltd., In re	Supply of food/beverages to corporates from third-party kitchens alongside menu planning and deployment of service staff falls under “other contract food services” (SAC 996337) and attracts 18% GST.	Click Here
Central Goods and Services Tax Act, 2017	Section 171	DG Anti Profiteering, DGAP v. Lifestyle International (P.) Ltd.	Omission of anti-profiteering rules and reassignment of functions (NAA to CCI to GSTAT) alters only the authority, not the statutory mandate; pending proceedings remain valid despite the lack of a savings clause.	Click Here
Central Goods and Services Tax Act, 2017	Section 171	DG Anti Profiteering, DGAP v. Lifestyle International (P.) Ltd.	Failure to reduce prices commensurately across all customers after a rate cut (28% to 18%) cannot be offset by cross-customer commercial arguments; unidentifiable profiteered amounts must go to consumer welfare funds.	Click Here
Central Goods and Services Tax Act, 2017	Section 171	DG Anti Profiteering, DGAP v. Lifestyle International (P.) Ltd.	No interest under Rule 133(3)(c) or penalty under Section 171(3A) can be imposed retrospectively for a profiteering period that occurred prior to the introduction of those provisions.	Click Here
Central Goods and Services Tax Act, 2017	Section 171	DG Anti Profiteering, DGAP v. Lifestyle International (P.) Ltd.	The 6-month timeline for the NAA to issue decisions under Rule 133(1) is directory and not mandatory; non-compliance does not lead to a breakdown or limitation bar on proceedings.	Click Here
Central Goods and Services Tax Act, 2017	Section 171	DG Anti Profiteering, DGAP v. Lifestyle International (P.) Ltd.	Expanding an inquiry to a PAN-India level under Rule 133(4) is legally valid when based on the respondent’s own admission of non-compliance; Rule 133(5) acts purely as a clarificatory provision.	Click Here

Anti-profiteering probes can expand to a PAN-India level based on data trends, surviving authority transitions and directory timelines.

Ashwani Kumar — Sat, 20 Jun 2026 13:04:59 +0000

Anti-profiteering probes can expand to a PAN-India level based on data trends, surviving authority transitions and directory timelines.

Issue

Whether the National Anti-Profiteering Authority (NAA) and the Directorate General of Anti-Profiteering (DGAP) have the jurisdiction under Rule 133 to expand an investigation to a PAN-India level across all products/customers beyond the localized scope of the initial consumer complaint.
Whether the omission of Rules 122, 124, 125, 134, and 137 via Notification 24/2022-CT causes ongoing anti-profiteering proceedings to automatically abate or become non-est in the absence of an explicit savings clause.
Whether the six-month timeline prescribed under Rule 133(1) for passing an anti-profiteering order is mandatory (causing proceedings to expire on breach) or merely directory.
Whether interest and penalties under Rule 133(3)(c) and Section 171(3A) can be levied retrospectively for a profiteering period that occurred before those specific provisions were enacted.
Whether a supplier can cross-offset anti-profiteering liabilities by showing they passed on higher tax benefits to certain customers or other products.

Facts

The Complaint: A consumer filed a complaint against an FMCG company for failing to pass on the benefits of a GST rate cut (from 28% to 18%, effective November 15, 2017) on a specific product.
Probe Expansion: During the initial probe, the respondent admitted a possible failure to pass on ₹1.98 crores to the same customer segment. Citing this, the NAA ordered a wider investigation under Rule 133(4). The DGAP subsequently expanded the scope PAN-India and quantified a total profiteering amount of ₹13.61 crores.
Transition of Power: While proceedings were active, a 2022 notification omitted multiple anti-profiteering rules. The NAA’s responsibilities were transferred first to the Competition Commission of India (CCI) and later centralized under the Principal Bench of the GST Appellate Tribunal (GSTAT). The respondent argued that this restructuring extinguished the original legal mandate.
Timeline Dispute: The final order was not passed within the standard six-month window from the receipt of the initial DGAP report, prompting a limitation challenge from the respondent.
Methodology Objection: The respondent contested the DGAP’s methodology of comparing average pre-rate-reduction base prices with actual post-rate base prices and argued that they passed on aggregate benefits across their customer network.

Decision

On Expansion of Jurisdiction: Decided in favor of the Revenue. Rule 133(4) explicitly empowers the NAA to direct further investigations without restriction if a wider pattern of tax-benefit retention is discovered. The broad mandate under Rule 129(2) allows the DGAP to look into “any supply,” meaning a probe is not restricted solely to the initial complainant’s transaction.
On Statutory Continuity: Decided in favor of the Revenue. The omission of the specific rules represented an administrative shift of authority (succession of functionaries), not an extinguishment of the legal mandate under Section 171. Prior orders and pending proceedings survive the transition.
On Limitation Period: Decided in favor of the Revenue. The timeline in Rule 133(1) does not specify penal consequences for a delay. Because anti-profiteering laws are beneficial, consumer-welfare legislations, the timeline is directory, not mandatory.
On Interest & Penalties: Decided in favor of the assessee. The period of alleged profiteering (Nov 2017 – Jan 2018) preceded the introduction of the enabling interest rules (June 28, 2019) and penalty provisions under Section 171(3A) (January 1, 2020). These cannot be applied retrospectively.
On Profit Computation & Cross-Offsetting: Decided in favor of the Revenue. The statutory duty under Section 171 is strict: the benefit of a tax reduction must be passed down to each individual recipient through a commensurate reduction in price. Cross-offsetting or averaging across different customers or products is illegal. The quantified amount of ₹13,61,51,254 was upheld and ordered to be deposited into the Consumer Welfare Funds since individual buyers could not be tracked.

Key Takeaways

No Cross-Subsidization Allowed: Under GST anti-profiteering principles, a business cannot absorb the tax cut on one product line or customer group by claiming it gave an extra discount to another. Each invoice stands on its own merits.
Administrative Change $\neq$ Legal Abatement: Structural abolitions or transfers of specialized tribunals (like shifting from the NAA to the CCI/GSTAT) do not wipe the slate clean for corporate defaults; the underlying statutory obligation remains continuous.
Protection Against Retrospective Penalties: While the Revenue can track and recover the actual core profiteered amount across extended timelines, it cannot attach newly enacted penal mechanisms (like interest or fines) to historical transactions executed prior to those clauses’ effective dates.
Directory Nature of Procedural Windows: Timelines binding a public authority to pass consumer-welfare decisions do not act as static statutes of limitation that let defaulting parties off the hook simply due to administrative delays.

GOODS AND SERVICE TAX APPELLATE AUTHORITY

DG Anti Profiteering, Director General of Anti-Profiteering, DGAP

Lifestyle International (P.) Ltd

Dr. Sanjaya Kumar Mishra, President
and Anil Kumar Gupta, Technical Member

NAPA No. 9 (PB) of 2025

MAY 26, 2026

S.K. Mishra, President.- In this proceeding under Section 171 of the Central Goods & Services Tax Act, read with Rule 133 of Central Goods & Services Tax Rules, 2017, hereinafter referred as CGST Act / Rules, for brevity, the following mixed question arose for determination: –

Whether the Respondent i.e. M/s Lifestyle International Pvt. Ltd., Mahagun Metro Mall, Plot No. VC-3, Sector-3, Vaishali, Ghaziabad, Uttar Pradesh-201010, has profiteered an amount of Rs. 13,61,51,254/- by not passing the benefit of reduction of rate of GST on Fast moving consumer goods (FMCG) dealt by it from 28 % to 18 % with effect from 15.11.2017 to 31.01.2018?

2. The facts giving rise to the present proceedings are that a reference was received on 18.12.2017 from the Standing Committee on Antiprofiteering under Rule 129 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “the Rules”), to conduct a detailed investigation in respect of an application filed by Ms. Neeru Varshney, R/o Flat No. 312, Sector-17A, Vasundhara, Ghaziabad-201012, Uttar Pradesh (hereinafter referred to as “the Complainant”), alleging profiteering by M/s Lifestyle International Pvt. Ltd., Mahagun Metro Mall, Plot No. VC-3, Sector-3, Vaishali, Ghaziabad, Uttar Pradesh-201010 (hereinafter referred to as “the Respondent”). The Complainant submitted that she had purchased a product, namely “Maybelline Fit Me Foundation”, from the Respondent and alleged that the Respondent had not passed on the benefit of a reduction in the rate of GST, despite the GST rate on the said product having been reduced from 28% to 18% with effect from 15.11.2017.

3. The reference was examined by the Directorate General of AntiProfiteering (hereinafter referred to as “the DGAP”) and Investigation Report dated 28.03.2018 under Rule 129(6) of the Central Goods and Services Tax Rules, 2017 was furnished to the erstwhile NAA. The Report concluded that the allegation of profiteering stood established against the Noticee for not passing on the benefit of reduction in GST rate from 28% to 18% w.e.f. 15.11.2017. It was found that the Respondent had realized an additional amount of Rs. 15,861/-, inclusive of GST, during the period from 15.11.2017 to 31.01.2018. Accordingly, vide Miss Neeru Varshney v. Lifestyle International (P.) Ltd. 69 GST 786 (NAA)/Final Order No. 08/2018 dated 25.09.2018, the NAA directed refund of Rs. 41/- with interest to the Applicant and deposit of the balance profiteered amount of Rs. 15,820/- in the Consumer Welfare Funds. The Authority also directed further investigation into the Respondent’s claim vide their submission dated 18.05.2018 before the Authority that “an amount of Rs. 1,98,46,438/- may not have been passed on to the very customer who had purchased the goods, the amounts much more than the said amount have been passed on to the other customers after the price was reduced consequent to the rate change”.

4. On receipt of the aforesaid order from the NAA, and examined the various submissions made by the Respondent vide Report dated 30.09.2019 the DGAP concluded that the Respondent has realized an additional amount or profiteered to the tune of Rs. 15,37,04,697/- from the recipients during the period from 15.11.2017 to 31.01.2018 which includes both the profiteered amount and GST on the said profiteered amount.

5. The Respondent has filed Writ Petition Nos. 12647/2018 and 11253/2019 before the Hon’ble High Court of Delhi, on the issue that the Order passed by the NAA is barred by limitation, along with certain other issues.

6. The DGAP vide its Report dated 30.09.2019 concluded profiteering of Rs. 15,37,04,697/-. However, the erstwhile National Anti-Profiteering Authority vide Interim Order (I.O.) No. 18/2020 dated 04.06.2020, referred the matter back to the Director General of Anti-Profiteering (DGAP) under Rule 133(4) of the Central Goods and Services Tax Rules, 2017 for re-investigation of the case on the basis of the Respondent’s submissions dated 18.02.2020 and 24.02.2020.

7. After receipt of the I.O No. 18/2020 from the erstwhile NAA a letter dated 15.06.2020 was issued to the NAA seeking copies of the submissions dated 18.02.2020 and 24.02.2020 filed by the Respondent, as referred to in Para-26 of I.O No. 18/2020 dated 04.06.2020. However, vide e-mails dated 23.06.2020 and 26.06.2020, the Authority advised this office to obtain the requisite documents directly from the Respondent.

8. On the basis of pre and post-GST rate reduction data and the revised details of outward taxable supplies furnished by the Respondent for the period from 15.11.2017 to 31.01.2018, the profiteered amount has been re-computed in compliance with I.O dated 04.06.2020. It was observed that the Respondent had increased the base prices of impacted goods despite reduction in GST rate from 28% to 18%, resulting in net higher realization amounting to Rs. 13,61,51,254/-. The computation was carried out category-wise and goods code-wise by comparing the average base price (after discount) prevailing during 01.11.2017 to 14.11.2017, or October 2017 where applicable, with the actual invoicewise base prices charged during the post-rate reduction period. The profiteered amount includes excess GST collected on the increased base prices. However, the amount relating to “Maybelline FIT Me Foundation” was excluded, as it had already been covered in the earlier Investigation Report dated 28.03.2018. The average base price of the said item was compared with the actual invoice-wise selling price charged during the post-GST rate reduction period w.e.f. 15.11.2017, as illustrated in Table-‘A’ below:

Table-‘A’ _ (Amount in Rupees)

SI. No.	Description	Factors	Pre Rate Reduction (01.11.2017 tc 14.11.2017)	Post Rate Reduction (From 15.11.2017)
1.	Product Code	A	1000004952711
2.	Product Description	B	SS17- S2 WHITE FILLERS 40X40CM
3.	Product Category	C	HC-Household
4.	Product MRP	D	349/-	349/-
5.	Total quantity of item sold	E	651
6.	Total taxable value (after Discount)	F	1,77,392/-
7.	Average base price (without GST)	G= (F/E)	272.49/-
8.	GST Rate	H	28%	18%
9.	Commensurate Selling price (post Rate reduction) (including GST)	1= 118% of G		321.54/-
10.	Invoice No.(Sold in Delhi)	J		1020011596
11.	Invoice Date	K		29.12.2017
12.	Total quantity (as per invoice indicated in H)	L		5
13.	Total Invoice Value (including GST)	M		1,745/-
14.	Actual Selling price (post rate reduction) (including GST)	N= “M/L		349/-
15.	Excess amount charged of Profiteering	O= “N-I	27.46/-
16.	Total Profiteering	P= L*O	137.30/-

From Table- ‘A’ above, it is evident that the Respondent did not reduce the selling price of “SS17-S2 WHITE FILLERS 40X40CM” commensurately despite reduction in GST rate from 28% to 18% w.e.f. 15.11.2017, and thereby profiteered an amount of Rs. 137.30/- on the said invoice, in contravention of Section 171 of the Central Goods and Services Tax Act, 2017. On the basis of the above methodology, profiteering in respect of all impacted goods sold through approximately 25.97 lakh transactions was similarly computed.

9. In the DGAP Report, the place (State or Union Territory) of supply- wise break-up of the total profiteered amount of Rs. 13,61,51,254/- was furnished as per table- ‘B’ below:

Table- ‘B’

S. No.	Name of State	State Code	Total Profiteering (Rs.)
1	Andhra Pradesh	37	51,11,372
2	Assam	18	5,163
3	Bihar	10	5,084
4	Chandigarh	04	14,41,541
5	Chhattisgarh	22	2,743
6	Delhi	07	97,64,413
7	Gujarat	24	18,14,365
8	Haryana	06	88,61,768
9	Jammu and Kashmir	01	4,94,693
10	Jharkhand	20	12,526
11	Karnataka	29	2,12,92,107
12	Kerala	32	51,40,417
13	Madhya Pradesh	23	5,48,814
14	Maharashtra	27	2,78,14,595
15	Odisha	21	22,161
16	Puducherry	34	14,177
17	Punjab	03	39,82,733
18	Rajasthan	08	12,73,793
19	Tamil Nadu	33	2,15,13,949
20	Telangana	36	1,07,92,233
21	Uttar Pradesh	09	1,11,67,671
22	Uttarakhand	05	7,65,060
23	West Bengal	19	43,09,876
Grand Total			13,61,51,254

10. The DGAP concluded that the Respondent profiteered by Rs. 13,61,51,254/- which was required to be passed on to the recipients by commensurate price reduction under Section 171. Since recipients were not identifiable, the amount was liable to be deposited in Consumer Welfare Funds. The report was considered by the erstwhile NAA and issued a notice dated 01.12.2020 to the Respondent to show cause why the findings should not be accepted.

11. The Respondent filed written submissions on 29.01.2021. In response thereto, the DGAP furnished its clarifications on 08.03.2021. Subsequently, the Respondent filed rejoinders dated 18.04.2021 and 17.09.2022 against the clarifications submitted by the DGAP. Thereafter, the DGAP filed its reply to the Respondent’s rejoinders on 21.10.2022. Further, vide Office Memorandum dated 08.04.2024, the Respondent was directed to file written submissions/rejoinder to the clarifications furnished by the DGAP vide communication dated 21.10.2022 within a period of four weeks from the issuance of the said Office Memorandum.

12. Subsequently, with effect from 01.10.2024, the Central Government, on recommendation of the GST Council, has vested the Principal Bench of the GST Appellate Tribunal (GSTAT) with the jurisdiction to examine anti-profiteering matters, in terms of Notification No. 18/2024-Central Tax dated 30.09.2024.

13. Hearing in this matter was heard on 04.12.2025, in which Shri Sparsh Bhargava, learned advocate, appeared on behalf of the Respondent through virtual mode and sought adjournment and submitted that the vires of Section 171 of the CGST Act, as well as the merits of the present proceedings, have been challenged by the Respondent before the Hon’ble High Court of Delhi. However, no stay Order has been granted by the Hon’ble High Court of Delhi.

14. In course of hearing and through several written submissions filed on different dates, the learned senior counsel appearing for the Respondent have raised following legal issues: –

The respondent claimed that the present investigation into other products is wholly without jurisdiction since the directions were given prior to amendment of rules and in absence of any complaint or material which has been placed on record by NAA.

ii.

The Respondent further claims that in view of omissions of Rules 122, 124, 125, 134 and 137 vide Notification No. 24/ 2022-CT dated 23.11.2022 without any savings, the present proceedings will not survive.

iii.

The present proceedings are barred by limitation.

iv.

No interest or penalty can be imposed on the Respondent.

15. In addition to the aforesaid legal issues, the respondent also raised the following factual aspects of the case: –

Retail Sale Price (RSP) is erroneously conflated with averaging of taxable value adopted by DGAP so as to justify the report, whereas the Hon’ble Delhi High Court in Reckitt Benckiser’s case has not supported such an approach.

ii.

The erstwhile NAA has affirmed to follow MRP based approach.

iii.

Maximum Retail Price (MRP) was equal to RSP in the first report. Methodology has changed from MRP to averaging.

iv.

Products which were bought and sold at the same GST rate (18%) did not undergo any rate change requiring any reduction in rate benefit to be passed on in terms of Section 171 of the CGST Act.

16. The Respondent has also raised the following issues: –

(a)

The amount of profiteering calculated in excess of the reduction in the rate of GST is arbitrary, incorrect and not justifiable.

(b)

Methodology of Discounted Average Sale Price for the period from 1st November 2017 to 14th November 2017 basis PAN India sales value, as adopted by the DGAP for calculating the amount of profiteering is grossly incorrect and suffers from subjectivity and multiple infirmities.

The Respondent has also presented a comparison sheet on the above containing the above workings which were also presented during the personal hearing on 04 February 2026.

Whether the order passed by erstwhile NAA is wholly without jurisdiction?

17. Coming to the question of Jurisdiction prior to the amendment of rules and absence of any complaint or material before erstwhile NAA, it was urged before us that erstwhile NAA is a creature of the statutes and does not have any inherent powers. It is bound by the statutory Provisions and the Rules and cannot exercise any Suo Moto powers to expand the scope of its jurisdiction. The Respondent relies upon the reported case of Gangaben v. Competent Authority & Dy. Collector, Surat 1999 SCC Online Guj 44.

We have gone through the aforesaid case. The Gujarat High Court in Gangaben’s case rejected the petitioner’s argument that the Dy Collector has no power to initiate Suo Moto action to cancel the revenue entry. The Court held that the procedural rules for appeal / revisions do not divest the Dy. Collector of their Suo Moto powers. Procedural rules cannot override the provisions of the Act. The Court was deciding the case with reference to Rule 108 (6) of Gujarat Land Revenue Rules, 1972 which allows the Commissioner to examine the record Suo Moto. The Court clarified that such provision does not take away the Dy. Collector’s parallel inherent powers which are derived from the Bombay Land Revenue Act, 1879. The facts of the case are different and ratio decided therein has no applicability to the present case.

18. The Respondent would further rely upon Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor (2017) 16 SCC 498 (para 36,39,56). In this reported case, the Supreme Court was considering the impact of regulation 82 of the Electricity Act, 2003. The Hon’ble Supreme Court held that in case a specific subject or exercise of power by the Commission on a specific issue is otherwise provided under the Act or Rules, the same has to be exercised by the Commissioner only taking recourse to that power and in no other manner. The Hon’ble Supreme Court further illustrated it and observed that there cannot be any exercise of the inherent power for dealing with any matter which is otherwise specifically provided under the Act. Hence, the Hon’ble Supreme Court held that the exercise of power for varying the tariff can only be done as per statutory provisions and not under the inherent power. This case is also distinguishable.

19. The Respondent also relies upon the reported case of All India Overseas Bank v. UOI (1996) 6 SCC 606 (para 10,11). The SC held that the SC ST Commission cannot issue order of injunction for grant of promotion, etc., with pending departmental enquiry.

20. The aforesaid judgements are distinguishable from present case in view of the facts and also law governing the proceedings under Section 171 of the CGST Act. For this purpose, we take note of Sub-rule (4) of Rule 133 of the CGST Rules, 2017, it is quoted below: –

Rule 133 (4) If the report of the ^[Director General of Antiprofiteering] referred to in sub-rule (6) of rule 129 recommends that there is contravention or even non-contravention of the provisions of section 171 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing, refer the matter to the ^3[Director General of Anti-profiteering] to cause further investigation or inquiry in accordance with the provisions of the Act and these rules.

This Rule was inserted by GSR 266 (E) dated 23.3.2018 w.e.f 23.3.2018

21. Vide notification no. 31 / 2019- Central Tax, dated 28.06.2019 w.e.f 28.6.2019, Sub-Rule (5) was inserted, same is quoted below.

(5)(a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Antiprofiteering referred to in sub-rule (6) of rule 129, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing, within the time limit specified in sub-rule (1), direct the Director General of Anti-profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules.

(b) The investigation or enquiry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry.

The plain reading of this provision reveals that it is non-obstante clause. And we are of the opinion the said provision is clarificatory one in the sense that sub-section (4) already confers the jurisdiction on the authority to direct further investigation or inquiry. There is no restriction on such direction, in other words there is no fetters on this power of the authority to direct further investigation.

22. In this case at the initial stage before passing Interim Order 08/2018 dated 25.09.2018, Respondent vide their submissions 18.05.2018 vide para 27 stated that “an amount of Rs. 1,98,46,438/-may not have been passed on to the very customer who had purchased the goods, the amounts much more than the said amount have been passed on to the other customers after the price was reduced consequent to the rate change”.

23. On the basis of such submissions the erstwhile NAA vide Final Order No. 08/2018 dated 25.09.2018, directed refund of Rs. 41/- with interest to the Applicant and deposit of the balance profiteered amount of Rs. 15,820/- in the Consumer Welfare Funds and also directed further investigation into the Respondent’s claim vide their submission dated 18.05.2018 as stated above. Therefore, we come to the conclusion the erstwhile NAA has jurisdiction to direct further investigation, given the peculiar facts of the case.

24. Sub Rule (5) is clarification and it does not confer the additional jurisdiction upon the NAA. Moreover, it is the respondent who has claim that other customer may not have been passed on to the other customers. So, they have invited the order from the NAA indirectly for further investigation. Now, that the further investigation is taken up, they cannot claim the NAA has no jurisdiction to direct investigation into the other products of the Respondent. Thus, 1^st contention of the Respondent is answered.

25. It is further submitted that no statutory authority or tribunal can assume jurisdiction in respect of subject matter which the statute does not confer on it and inherent powers are available only to Courts/Tribunals or judicial bodies. The Respondent relied upon the following decisions:

(a)

Manohar Lal Chopra v. Rai Bahadur Rao 1962 AIR SC 527 (para 23)

(b)

UOI v. Paras Laminates (P.) Ltd. [1990] 49 ELT 322 (SC)/AIR 1991 SC 696 (para 8)

(c)

Smt. Shrisht Dhawan v. Shaw Brothers (1992) 1 SCC 534 (para 19)

(d)Prayag

Upnivesh v. Allahabad Vikas (2003) 5 SCC 561 (para 7)

All these cases cited above speak of the inherent jurisdiction of Court and Tribunals and lack of it as far as authorities are concerned. The case in hand is distinguishable, as it would be apparent from our discussions. From the above discussion, we are of the opinion that the erstwhile NAA has exercised the power under sub-rule (4) of Rule 133 of the CGST Rules, 2017, which noticed earlier speaks of further investigation without giving limitations to such order and we have already held that Sub Rule (5) of Rule 133 of the CGST Rules, 2017 is clarificatory and does not confer some powers which is absent from the jurisdiction of the NAA.

26. Looking this issue in a slightly different angle, we take note of the Sub Rule (2) of the Rule 129 of the CGST Rules, 2017, which provides that DGAP shall conduct the investigation and gather all necessary evidence necessary to determine whether the benefit of a reduction in the tax rate on supply of any goods and services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reductions in prices. In interpreting this provision, Hon’ble High Court of Delhi in the case of Reckitt Benckiser at para 159 has held that such power is very wide. We consider it apposite to quote relevant paras i.e. 159, 160 and 161: –

Expansion of investigation beyond the scope of the complaint is not ultra vires the statute

159. Section 171 of the Act, 2017 is widely worded and does not limit the scope of examination to only goods and services in respect of which a complaint is received. The scope of powers of the DGAP is provided for in rule 129 of the Rules, 2017. From a reading of the said rule especially the expression “any supply of goods or services” used in sub-rule (2) of rule 129, it is apparent that the scope of the DGAP’s powers is very wide and is not limited to the goods or services in relation to which a Complaint is received. The word “any” includes within its scope “some” as well as “all”. (underlined to lay emphasis)

160. In any event, the ignorance of the consumer or lack of information or surrounding complexity in the supply chain cannot be permitted to defeat the objective of a consumer welfare regulatory measure and it is in this light that the subject provision is required to be construed.

161. In the context of similar powers of investigation exercised by the Director General under the Competition Act, 2002, the Supreme Court in Excel Crop Care Limited v. Competition Commission of India [(2017) 8 SCC 47.] , has held that the Director General would be well within its powers to investigate and report on matters not covered by the complaint or the reference order of the Commission, and an interpretation to the contrary would render the entire purpose of investigation nugatory. The High Court of Delhi in Cadila Healthcare Ltd. v. CCI [Cadila Healthcare Ltd. v. Competition Commission of India, 2018 SCC OnLine Del 11229.] , relying on the judgment of the Supreme Court in Excel Crop Care [(2017) 8 SCC 47.] has clarified in express terms that the scope of investigation by the Director General is not restricted to the matter stated in the Complaint and includes other allied as well as unenumerated matters. Consequently, the expansion of investigation or proceedings beyond the scope of the complaint is not ultra vires the statute.

27. Thus, if the powers of the investigating authority is so wide as held by the Delhi High Court in the aforesaid case, a natural corollary to such observations would be similar wide powers are with the authority who is vested with the Jurisdiction to examine whether the report of the DGAP is correct or incorrect and whether registered person has profiteered by not passing on the benefit of the reduction of the rate of tax or availment of the ITC.

ii.

Whether the omission of Rules, regarding the creation of NAA makes the whole process non-est?

28. The Respondent claims that in view of the omission of Rules 122, 124, 125, 134 and 137 vide Notification No. 24/2022-CT dated 23.11.2022 without any saving clause, the present proceeding does not survive. The Respondent relied upon two judgments i.e. Shree Bhagwati Steel Rolling Mills v. CCE [2016] 53 GST 215/36 GSTR 222 (SC) and the Constitution Bench in Kolhapur Canesugar Works Ltd. v. UOI [2000] 119 ELT 257 (SC), wherein it is submitted that;

“The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. Thus, the operation of repeal or deletion as to the future and the past largely depends on the savings applicable.”

29. Further, it is submitted that Section 6 of the General Clauses Act will also does not apply to a rule. The relevant extract is as under: –

“When the legislature by clear and unambiguous language has extended the provision of section 6 to cases of repeal of a ‘Central Act’ or ‘Regulation’, it is not possible to apply the provision to a case of repeal of a ‘Rule’. The position will not be different even if the rule has been framed by virtue of the power vested under an enactment; it remains a ‘rule’ and takes its colour from the definition of the term in the Act (General Clauses Act).”

30. In light of the aforesaid submissions, we have examined the deleted provision. Rule 122 provides Constitution of the NAA, Rule 124 provides Appointments, Salary, Allowances, etc., of the Authority, and Rule 125 provides Secretary to the Authority, Rule 134 provides for the quorum and decision to be taken by the majority and Rule 137 provides for the tenure of the Authority. It is also not disputed that Rules were omitted with effect from 23.11.2022 and there appears to be no savings clause for the same.

31. By virtue of the aforesaid Notification 24/2022-Central Tax dated 23.12.2022, the Rules stated above were omitted, there was also amendment to Rule 127 and 137, in 127 in the marginal heading for the word ‘duties’, the word ‘functions’ shall be substituted. Thus, Rule 127 which provided “duties for the authority” were made to provide “functions of the Authority”. In case of “it shall be duty of the Authority,” the words “the authority shall discharge the following functions namely”: – was substituted. After the Rule 137, an explanation was added which reads as follows:

“[authority means authority notified under sub-section 2 of Section 171 of the act]”.

Thus, it is clear, on the recommendation of GST Council, the Government of India has taken away the authority from the erstwhile NAA and also made amendment to the rule to define the rule of authority which is to be notified under sub-section 2 of the Section 171 of the Act.

32. Competition Commission of India, (hereinafter referred as CCI for brevity) was conferred with the powers to look into the matters of AntiProfiteering which was earlier being entrusted with the NAA Notification 24/2022-Central Tax dated 23.12.2022. Thus, it is clear that there has been a change in the authority only. The Government decision to address illegal profiteering aspect was to continue. Further, with effect from 01.10.2024, the Central Government, on recommendation of the GST Council, has vested the Principal Bench of the GST Appellate Tribunal (GSTAT) with the jurisdiction to examine anti-profiteering matters, in terms of Notification No. 18/2024-Central Tax dated 30.09.2024. Therefore, in this case principles of succession will apply and the orders passed by the NAA before such omission of rules will not be treated as non-est, it cannot simply vanish from the record. It is not that no authority was given responsibility to discharge the function, hence we are of the view the omission of the rules will not result in disappearance of this order and proceedings.

iii.

Areedings barred by limitation?

33. The Respondent claimed that proceedings are barred by limitation. Here, we note that sub rule (1) of Rule 133 of the CGST Rules 2017 provides that Authority shall within a period of 6 months from the date of receipt of the report from DGAP determined by the registered person has passed on the benefit etc., in other words, it provides a timeline of 6 months to the authority to decide a matter. This question of limitation was considered by Hon’ble High Court of Delhi in the case Reckitt Benckiser India Pvt. Ltd, and vide para 158 of the said judgement dated 29.01.2024, the Delhi High Court took note of time limit for furnishing of report by the DGAP to the erstwhile NAA and held that it is discretionary. The relevant para 158 is quoted below: –

158. In some cases, the petitioners have pointed out that the timelines as provided in the Rules, 2017 have not been followed. They further contended that as a result, the proceedings are vitiated. However, it is important to note that the Rules, 2017 do not provide any consequences in case the time limits provided thereunder lapse. As held earlier, the antiprofiteering provisions in the Act, 2017 and the Rules, 2017 are in the nature of a beneficial legislation as they promote consumer welfare. The courts have consistently held that beneficial legislation must receive liberal construction that favours the consumer and promotes the intent and objective of the Act. That being the scenario, it cannot be said that the proceedings as a whole abate on lapse of time limit of furnishing of report by DGAP. The Supreme Court in P.T. Rajan v. T.P.M. Sahir [(2003) 8 SCC 498.] has held that “It is well-settled principle of law that where a statutory functionary is asked to perform a statutory duty within the time prescribed therefore, the same would be directory and not mandatory.” and that “a provision in a statute which is procedural in nature although employs the word “shall” may not be held to be mandatory if thereby no prejudice is caused.” Consequently, the time limit provided for furnishing of report by DGAP is directory in nature and not mandatory.

34. From the above and by applying the said principles, we come to the conclusion that sub-rule (1) of Rule 133 of the CGST Rules 2017 provides for a time limit for deciding a case without providing the consequences for non-compliance is a directory provision and not mandatory provision. Moreover, we have consistently held that Section 171 is benevolent legislation and should receive liberal and pragmatic construction and avoid restrictive, parochial and pedantic approach. A liberal construction that serves the consumer and promotes the intent of the Act should be resorted to. Thus, we come to the conclusion that proceedings are not barred by the limitation.

iv.

No interest or penalty should be imposed on the Respondent?

35. As far as, third legal contention is concerned that Respondent is not liable to pay any interest or penal liabilities, the Respondent has relied upon decision of the GSTAT in DGAP v. Proctor & Gamble Group (GSTAT – NEW DELHI)/(2025) 35 Centax 77 (Tri-GST – Delhi). The provision for imposition of penalty i.e. Section 171 (3A) has been introduced with effect from 01.01.2020. The provision to impose interest as per clause (c) of Sub Rule (3) of Rule 133 was inserted on 28.06.2019. The investigation of the alleged profiteering made between 15.11.217 to 31.01.2018. Hence, aforesaid ratio decided in case is applicable in this case and, therefore, Respondent is not liable to pay any interest or penalty on profiteered amount.

Conclusions.

36. It is not disputed in this proceeding that with effect from 15.11.2017, the rate of GST on the Fast-moving consumer goods (FMCG) for the products dealt by the M/s lifestyle International Pvt. Ltd., was reduced from 28 % to 18%. It is also not disputed and had never been highlighted by the learned Sr. Counsel for the Respondent that after such reduction of 10 % of rate of GST, the Respondent, to the contrary, did not reduce the MRP on FMCG products so as to pass on the benefit to the consumers. This issue was considered by the Hon’ble Delhi High Court in the Reckitt Benckiser India Pvt. Ltd., vide Para 117. At Para 117 of the Hon’ble High Court has held that the fundamental presumption under section 171 that every tax reduction must result in “price reduction” is not correct. The use of the expression “shall” in section 171 of the Act, 2017 means that the supplier is required to pass on the benefit of the reduced tax rate and the benefit of input-tax credit, and that such passing on is to be carried out only by way of commensurate reduction of price of the goods or services. Accordingly, costing and market-related factors are irrelevant for NAA, as it is only required to examine whether or not there is any reduction in tax rate or benefit of accruing input-tax credits and if so, whether the same has been passed on by way of commensurate reduction of prices. The Delhi further held that the NAA is not concerned with the price determined by a supplier, for the supply of particular goods or services, exclusive of the GST or input-tax credit component. The supplier is at liberty to set his base prices and vary them in accordance with the relevant commercial and economic factors or any applicable laws. Consequently, NAA is only mandated to ensure that the benefit of reduced rates of taxes and inputtax credit is passed on. NAA cannot force the petitioners to sell their goods or services at reduced prices.

37. Again, in the aforesaid case of Reckitt Benckiser, the Delhi High Court in para 119 accepted the submission of learned Amicus Curiae that, if there is any variation on account of other factors, such as any costs necessitating the setting off of such reduction of price, the same needs to be justified by the supplier. The inherent presumption that these must necessarily be a reduction in prices of the goods and services is a rebuttable presumption. The Court further held that if the supplier is to assert reasons for offsetting the reduction, it must establish the same on cogent basis and must not use it merely as a device to circumvent the statutory obligation of reducing the prices in a commensurate manner contemplated under section 171 of the Act, 2017.

38. Thus, it is apparent as there is no dispute regarding reduction of rate of tax, no dispute regarding that there has been no change in MRP of the SKUs. It is the duty of the Respondent to show that it has not profiteered from the reduction in the rate the GST. The Respondent has not made any such attempt in this case, rather it is pointed out that methodology adopted by DGAP is incorrect. We take it as an admission of profiteering. Our view is further fortified by para 27 of the written statements submitted by the Respondent on 18.05.2018, wherein Respondent has mentioned that “an amount of Rs. 1,98,46,438/- may not have been passed on to the very customer who had purchased the goods, the amounts much more than the said amount have been passed on to the other customers after the price was reduced consequent to the rate change”. The Respondent further submits that subsequently Rs. 10,06,42,391/- was passed on to the consumers / customers by reducing the price.

39. Thus, we re-iterate our observation to the effect that there is no dispute regarding reduction of rate of GST, no issue was raised by the Respondent that actually the rates were decreased after the change of the Rates of GST. The Respondent questions the methodology adopted for calculation of the profiteered amount and vide 27 para of the written submissions of 18.05.2018 by the Respondent and has admitted that he “may not have been passed on to the very customer who have purchased the goods”.

40. In course of hearing, learned counsel appearing for the Respondent would submit that they have passed on more benefit to other customers. However, a plain reading of the Section 171 of the Act leads us to the conclusion that it is the duty of the registered person to pass on the benefit of reduction of rate of tax to the recipient by way of commensurate reduction in price. Thus, if a registered person sells a product to one person without reduction of prices thereby denying the benefit of reduction of prices to the customers and at the same time, he reduces the price exceeding the rate of reduction to another customer for another product or the same product, then also he cannot claim he has not committed profiteering. Section 171 is benevolent provision and each and every customer is entitled to receive the benefit of reduction of rate of tax or availing of the ITC.

41. The learned Counsel of the Respondent would also submit that the imposition of GST on the alleged profiteered is illegal, as the Respondent has already paid the GST to the Government and if the Tribunal come to the conclusion that reduction of GST has not been passed on to the customers by the Respondent, then it should direct the government to refund the GST to the Respondent. We are of the of opinion such submission is fallacious on the face of it as it is not the duty of the GSTAT, in its Anti-Profiteering Division, to pass a money decree in favor of the Respondent. Infact the Union of India is not a party. We are not here to see whether Respondent paid any additional tax to the Revenue. If it is the case of the Respondent that it has paid more tax than he is liable to pay, then Respondent to take appropriate remedies under the Act. The Anti-Profiteering division is not a proper forum to address this issue.

42. The Respondent has claimed that DGAP has not followed the same methodology in both of their reports. The methodology resorted to by taking Selling price by the Life style for calculating the profit. In the first report, the DGAP alleges that that MRP of the product was Rs. 550, while the retail sale price (RSP) was Rs. 525. In other words, DGAP submits that they have not adopted MRP based approach in its first report. It is contended by the learned counsel that the DGAP has not adopted proper methodology in its reports, therefore, report under consideration is vulnerable and liable to be set aside. However, we have seen the para 26 to 28 of order of the NAA passed on 04.06.2020 and we are of the view that the erstwhile NAA has remanded the matter for further investigation without going into the merits of the case and without considering the contentions and submissions of the Respondent at that stage. Erstwhile NAA found it imperative that there is need for revisiting the investigation and computation of the profiteering amount, thus, it is not correct to submit that the NAA has found fault in methodology adopted by the DGAP in calculating the profiteering in the first report, and therefore, this argument should also be rejected.

43. The learned counsel for the Respondent would submit that DGAP committed error by adopting the method of comparing the average prices of pre-GST period with the actual prices of the post-GST period. This issue has somehow been decided in a different context in Reckitt Benckiser India case. The Court has approved of averaging of benefit to be passed on to its buyer in case of real estate project. We consider it apt to quote relevant para of 129 of the Judgment passed by Delhi High Court in the case of Reckitt Benckiser India Pvt. Ltd.: –

129. However, this court finds that the methodology adopted by NAA and DGAP to arrive at the profiteering amount of the real estate industry was generally based on the difference between the ratio of input-tax credit to turnover under the pregoods and services and tax and post-goods and services and tax period. This court is in agreement with the contention of the learned counsel for the petitioners representing the real estate companies that the methodology adopted by NAA is flawed as in the real estate sector, there is no direct correlation between the turnover and the input-tax credit availed for a particular period. The expenses in a real estate project are not uniform throughout the life cycle of the project and the eligibility of credit depends on the nature of the construction activity undertaken during the particular period. As it is an admitted position that neither the advances received nor the construction activity is uniform throughout the life cycle of the project, the accrual of input-tax credit is not related to the amount collected from the buyers. This court is in agreement with learned counsel of the petitioners that one needs to calculate the total savings on account of introduction of goods and services tax for each project and then divide the same by total area to arrive at the per square feet benefit to be passed on to each flat buyer. This would ensure that flat-buyers with equal square feet area received equal benefit. The court, while hearing the present batch of matters on merits, shall take the aforesaid direction/interpretation into account.

It is the prerogative of the legislature to decide how the benefit is to be passed on to the consumers. (underlined to lay emphasis)

Hence, we find no error in taking average prices of the pre-GST period.

44. We have carefully considered the DGAP’s Report dated 23.11.2020, the submissions made by the Respondent and all the materials placed on record. It is revealed that the Respondent has failed to pass on the benefit of GST rate reduction to customers who have purchased various items during the period from 15.11.2017 to 31.01.2018, thereby violating the provisions of Section 171(1) of the CGST Act, 2017. Thus, the Report submitted by the DGAP is accepted to the extent that Respondent has profiteered an amount of Rs. 13,61,51,254/- only for the period of 15.11.2017 to 31.01.2018. Accordingly, the Respondent is directed to deposit a total amount of Rs. 13,61,51,254/-, i.e. Rs. 6,80,75,627/- in the Consumer Welfare Funds of the Central Government and Rs. 6,80,75,627/- in the State / UT Consumer Welfare Fund, of the respective States / UT, in proportion, as detailed in Table-B of Para 9 of this Order, since the recipients are not identifiable. In case, the State Consumer Welfare fund account for some States and Union Territories are not yet created, the share of profiteered amount of that State / UT to be deposited in the Central Consumer Welfare Fund for time being.

45. A report in compliance of this order shall be submitted to the DGAP by the concerned Commissioner within a period of 4 months from the date of receipt of this order.

46. Copy each of this order be supplied to the respondent and to the concerned Commissioner CGST / SGST for necessary action.

47. Judgment pronounced in open court.

Both operational models of outdoor food delivery constitute a composite Third-party food procurement and supply to corporate clients with minimal serving staff qualifies as ‘’Supply of Service taxable at 18% GST.’ under SAC 996334, attracting 5% GST’ under SAC 996334, attracting 5% GST without ITC.

Ashwani Kumar — Sat, 20 Jun 2026 13:01:47 +0000

Third-party food procurement and supply to corporate clients with minimal serving staff qualifies as ‘Other Contract Food Services’ taxable at 18% GST.

Issue

Whether the supply of food and beverages procured from third-party kitchens and delivered to corporate clients for their staff canteens constitutes a “Supply of Service” or a mere aggregator/trading activity.
Whether such corporate food supply arrangements qualify as a “Restaurant Service” (taxable at 5%) or “Outdoor Catering Service,” or if they fall under “Other Contract Food Services” (SAC 996337) taxable at 18% GST.

Facts

The Business Model: The appellant supplies food and beverages to corporate clients for distribution to their employees.
Operational Setup: The appellant does not cook the food or own a digital ordering platform. Instead, it procures packed or bulk food from third-party partner kitchens and uses outsourced logistics to deliver it to client locations.
Service Elements: Despite not cooking, the appellant finalizes menus with partner kitchens, conducts quality assurance/hygiene checks, holds kitchens accountable via service level agreements (SLAs), and deploys service personnel at the client sites during lunch and dinner.
The Dispute: The appellant sought classification that would allow a lower tax rate, while the Revenue aimed to classify it under a higher-rated residuary service category within Heading 9963.

Decision

On Aggregator Status: Decided in favor of the Revenue. The extensive involvement of the appellant—ranging from menu curation and strict quality control to on-site serving deployment—proves they act as a principal service provider, not a mere passive digital aggregator.
On Service Deeming Fiction: Under Schedule II of the CGST Act, 2017, the structured activity of supplying food and beverages is explicitly deemed a “Supply of Service.”
On Rejection of Concessional Rates: * Restaurant Service (5%) is ruled out because the appellant lacks its own dining premises, does not cook the food, and does not operate an e-commerce platform.
- Outdoor Catering Service is inapplicable because the supply is a continuous corporate arrangement, not an event-based or occasional function, and lacks on-site food preparation by the appellant.
Final Classification: The activity falls squarely under Heading 9963, SAC 996337 (“Other contract food services”). It is taxable under Serial No. 7(vi) of Notification No. 11/2017-Central Tax (Rate) at the standard rate of 18% GST with full input tax benefits, rather than the restrictive 5% rate.

Key Takeaways

Catering to Corporates $\neq$ Outdoor Catering: Continuous, contract-based food supply chains serving day-to-day corporate workforces are legally distinguished from conventional “outdoor catering,” which by definition requires an occasional or event-centric nature.
The Legal Fiction of Schedule II: Under Indian GST laws, any commercial arrangement involving the structured distribution of food for consumption is legally classified as a service, even if the provider completely outsources the core cooking process to third parties.
Strict Parameters for 5% GST: The lower 5% GST rate is highly regulated. To claim it under the “restaurant” category, an entity must satisfy concrete physical thresholds (like operating eating premises) or digital thresholds (like qualifying as an Electronic Commerce Operator). If neither is present, the business defaults to the 18% residuary service tier.

APPELLATE AUTHORITY FOR ADVANCE RULING , TAMILNADU

Frutta Services (P.) Ltd., In re*

MADAN MOHAN SINGH and S. Nagarajan, Member

A.R.Appeal No.02/2026 AAAR
Order No. AAAR/06/2026(AR)

MAY 8, 2026

Kaveyan K., Director, Sundaresan R., Co-Founder and Gomathisankar S., Head of Finance for the Applicant.

proceedings

1. At the outset, it is made clear that the provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act are in pari materia and have the same provisions in like matter and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act, 2017.

2. The subject appeal was filed under Section 100(1) of the Tamil Nadu Goods & Services Tax Act 2017/Central Goods & Services Tax Act 2017 (hereinafter referred to ‘the Act’) by M/s. Frutta Services Private Limited, (hereinafter referred to as ‘Appellant’). The Appellant is registered under the GST Act vide GSTIN 33AAFCF9204P1ZC. The appeal was filed by the appellant against the Frutta Services (P.) Ltd., In re (AAR – TAMILNADU)/Advance Ruling No. 60/ARA/2025, dated 16.12.2025 passed by the Authority for Advance ruling, Tamil Nadu (‘AAR’) on the Application for Advance ruling filed by the Appellant.

3.1 The Appellant had stated before the Advance Ruling Authority that they are engaged in supply of food and beverages to Corporates for distributing to staff; that the applicant neither manufactures nor prepares the food and beverages; that they have various kitchens and vendors registered with them from whom goods are picked either in individual packing or bulk packages and delivered to the client’s location; that the serving of food in the staff canteen is managed by the client; that there is no element of manufacturing or preparing or processing of foods by the applicant and the whole transaction is like an aggregator. The applicant had applied for Advance Ruling vide application ARA-01, dated 28.05.2025, seeking a ruling on Whether the applicant can claim input tax credit (ITC) and charge the client according to the category of supply of goods.

3.2 The AAR vide Ruling No. 60/ARA/2025, dated 16.12.2025, ruled as follows:-

No, the applicant cannot charge GST on the outward supply of food to the client according to the category of inward supply of goods received by them. The applicant is required to pay tax on the composite supply of service involving supply of food, at the rate of 18% (9% CGST and 9% SGST) as per SI. No. 7(vi) of the Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, as amended.

The applicant is eligible to avail ITC on the inward supply of goods/service as discussed in para 6.16 above.

3.3 The Authority for Advance Ruling (AAR) had arrived at the above decision based on the following discussions held therein,

•

The appellant had an agreement with their corporate clients for supply of food in the form of breakfast, lunch and dinner. The appellant did not cook the food but engaged third party kitchens under agreement to supply food.

•

The appellant got the food prepared as per the menu mutually agreed upon by the applicant and their client, arranged for transportation of food from the kitchen location to the clients’ location, ensured quality standards of the food prepared in the third-party kitchens, enforced maintenance oi hygiene at the kitchen location where the food is prepared.

•

The appellant is not Just trading in packed/branded food items, they undertake pickup and delivery of fresh cooked food at the doorstep of the client, they are also involved in providing an array of logistics services including transportation and ensuring quality/ hygiene; the activity, per se, of the applicant cannot be considered as a mere ‘supply of goods’, but a composite supply with supply of logistics services along with supply of food, the same is liable to be treated as a ‘supply of service as laid down in clause (b) to para 6 of Schedule II to the CGST Act, 2017.

•

From the Explanatory Notes to Tariff heading 9963 it was observed that irrespective of the fact whether a person undertakes preparation of food, and, supply services, or whether a person undertakes just supply services involving food, both the category of services fall within the same service accounting code. The appellant supplies food based on a contractual arrangement with the customer, at institutional or industrial location specified by the customer on an ongoing basis. Therefore, the overall supply of food services rendered by the appellant falls under the SAC 996337.

•

As the service carried out by the appellant does not fit into the category of services covered under SI. Nos. 7(i) to 7(v) of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, as amended, the activity of supply of food undertaken by the appellant under a contract falls under entry No.7(vi), being the residual entry, thereby attracting GST at 18% (9% CGST and 9% SGST).

•

Since the inward supply of goods/services is actually used by the appellant for making an outward composite supply of food and service, in the same line of business, they fall under the exclusion clause provided under the proviso to Section 17(5)(b)(i) of the Act, ibid, and accordingly, are eligible to avail ITC.

3.4 Aggrieved by the said ruling pronounced by the AAR, the Appellant has filed the instant appeal. The Appellant have put forth the following points in support of their defence:

•

That the Ld. Authority for Advance Ruling (“AAR”) has erred in law and on facts in holding that the Appellant’s activity constitutes a composite supply of services merely because the goods supplied are delivered to the customer.

•

That the AAR has placed undue reliance on clauses in the agreement and concluded that the Appellant is rendering a service. The appellant further states that this finding is legally flawed as every contract for sale of goods necessarily specifies Quality standards, Quantity requirements and Delivery timelines and such clauses are conditions of sale, not indicators of a service contract; these clauses merely ensure proper performance of the sale.

•

That the AAR has ignored the dominant intention test as held by the Hon’ble Supreme Court in BSNL v. Union of India, wherein Hon’ble Supreme Court says that a transaction must be examined based on its dominant intention and in the present case the dominant intention of the recipient is purchase of food. The appellant also adds that they do not cook the food, do not serve it; neither provide manpower nor provide hospitality or catering services and that delivery is merely a means to effect the sale and does not alter the dominant nature of the transaction.

•

That classification of the activities undertaken by them under supply of services under Heading 9963 is incorrect as the Appellant’s activity lacks the essential elements of a service like human intervention at the point of consumption, catering. The applicant also states that mere aggregation and delivery of goods cannot be classified as a service and the classification under Heading 9963 is erroneous.

•

That the impugned order failed to appreciate revenue neutrality and GST design as the Appellant has discharged GST on the supplies made and there is no loss of revenue.

•

The appellant has argued that the Order misapplied the concept of “naturally bundled”; the concept of “naturally bundled” applies only where there are multiple independent supplies and it cannot be used to convert incidental activities into supplies or artificially split a single supply into multiple supplies.

•

The appellant also contends that the AAR has erred in equating performance obligations with supply character, because in law, obligations as to quality, quantity and time do not change the nature of supply; they are ancillary to the principal supply of goods and there is no separate consideration is paid for “timeliness” or “quality assurance”.

The applicant had relied on various Advance Rulings and case laws to strengthen their stand.

3.5 Based on the above, the Appellant prayed that the Hon’ble Appellate Authority for Advance Ruling may be pleased to hold that supply of food by the Petitioner is liable to GST @ 5% as restaurant/food service; Hold that logistics, delivery and facilitation services are taxable separately @ 18% which the Company is already doing; Set aside the impugned Advance Ruling to the extent it levies 18% GST on the entire transaction; Pass such other order(s) as may be deemed fit in the interest of justice.

4. Personal Hearing

4.1 The Appellant was given an opportunity to be heard on 08.04.2026. Mr. Kaveyan K., Director, Mr. Sundaresan R„ Co-Founder, Mr. Gomathisankar S., Head of Finance of M/s. Frutta Service (P.) Ltd appeared for the personal hearing as the authorized representatives (AR) of M/s. Frutta Service (P,) Ltd. The AR reiterated the submissions made by them in the ‘Grounds of Appeal’ filed along with the application.

4.2 The AR informed that they are food aggregators and procure food items from open market and supply to their corporate customers. The AR referred to the original ruling of Authority for Advance Ruling, Tamil Nadu, wherein it was stated that supply undertaken by the appellant is a composite supply. The AR argued that the AAR has wrongly classified the activity as composite supply; and that supply of food and providing logistics for delivery of those food items are two different activities. The AR further added that logistics happens only when the food items are received by the applicant and then sent to their customers; sometimes food items are directly sent to the customers from the respective kitchens. The AR said that delivery is done by third party delivery service providers and they don’t own any vehicles for delivery of the food items. The AR also added that there is no value addition at their end, the food procured from the kitchen is as such provided to the customers.

4.3 Further, the AR informed that their customers request audit documents once in three months for quality assurance and the appellant does audit of the kitchens and submit the audit documents to their customers.

5. Discussions and Findings:

5.1 We have carefully examined the submissions made by the Appellant in their advance ruling application and the submissions made during the personal hearing. We have also considered the issue involved, the relevant facts and the Appellant’s submission/interpretation of law in respect of question on which the advance ruling is sought.

5.2 We note the Appellant’s claim that they are engaged in supply of food and beverages to their corporate clients and that they neither prepare food nor serve them at the client’s canteen. The appellant procures the food from third party sources in a packed condition and supply it to their clients through outsourced logistics provider.

5.3 We further take note that the appellant has entered into agreements called as “Service agreement” with their corporate clients and “Kitchen Agreement” with various third-party kitchens. From the service agreement entered with the corporate clients, it is noted that the appellant has to undertake the activities as per the scope of services described in Annexure 1 of the said agreement. The appellant has to work with their partner Kitchens to prepare the menu for each week and submit for their clients’ approvals. The appellant engages Quality Assurance (QA) team to perform periodic reviews and checks with the kitchen on its hygiene and best practices. The appellant has to arrange the delivery of the food from the partner Kitchen to the client location through its designated delivery partners and also pick-up the delivery vessels from the client location. The appellant has to deploy a service person for serving – Per person for Lunch and dinner service.

5.4 The appellant also has an agreement with the kitchens for supply of food. From the said agreement, it is noted that the kitchens have to ensure that there are no deviations from service levels in respect of the food quality, taste and quantity. The appellant would take care of the delivery of the products. A common pickup point would be finalized to pick up the products from the Kitchen by the applicant’s logistics team. As per the agreement, the Kitchens are requested to cooperate for any random inspection which the applicant’s client or the applicant might carry out to check product quality, hygiene and preparation. The agreement also has a provision for imposing penalty on the kitchens for violation of the terms of service.

5.5 From the agreements entered by the appellant both with the vendors and their clients, it is seen that the applicant is not a mere aggregator of food. The appellant has an extensive involvement in supplying the food to their clients, right from finalising the menu to ensuring the quality of the food, ensuring maintenance of hygiene at the kitchen up to ensuring that the food reaches the premises of the client in a time bound manner. Therefore, the appellant’s argument that they are mere aggregators of food is not acceptable.

5.6 Further, as per entry A. 5. of Annex 1 to the Service Agreement, the appellant deploys a service person for serving – per person for Lunch and Dinner. In the light of the said entry in the service agreement, the stand taken by the appellant that they are not involved in serving the food at the clients’ premise gets diluted.

5.7 It is to be noted that the GST law deals supply of food differently from other goods. Para 6 (b) of Schedule II to the CGST Act, 2017 specifically treats supply of food as a supply of service.

5.8 The relevant portion of the said Schedule is reproduced below for reference:

(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

Schedule II of the CGST Act, 2017 mentions the activities or transactions to be treated as supply of goods or supply of services. From entry 6(b) it is seen that the supply of food in any manner whatsoever is to be treated as a supply of service.

5.9 The appellant raises an issue for clarification as to whether supply of food by the appellant qualifies as restaurant service taxable at 5% GST. In this regard, it is to be noted that Restaurant is not defined in the CGST / TNGST Act. Therefore, we have to rely on the common usage or parlance of the word.

The Oxford Learner’s Dictionary defines Restaurant as a place where you can buy and eat a meal.

The Cambridge Dictionary defines Restaurant as a place where meals are prepared and served to customers.

Merriam Webster Dictionary defines Restaurant as a business establishment where meals or refreshments may be purchased.

5.10 Also, as per Notification No. 11/2017-Central Tax (Rate), dated the 28th June, 2017, as amended by Notification No. 20/2019-Central Tax (Rate) dated 30th September, 2019, Restaurant service means supply by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied. So, restaurant is a place where food is served. The food may be prepared at the premise or at a different place, the food may be consumed at the premise or taken away for consumption. In the instant case, such a premise is absent or the appellant has not produced any document to establish that such a premise exists to supply food. Moreover, the appellant had submitted a letter dated 07.10.2025 providing a brief note on the business, wherein it was mentioned that the appellant functions purely as an aggregator / facilitator of food supply and not as a restaurant or caterer as there is no cooking or preparation of food by them. On the above grounds, it can be concluded that the activities of the appellant cannot be treated as restaurant service.

5.11 The appellant undertakes the activity of supply of food to their corporate clients. To arrive at the conclusion as to whether the said activity is a supply of goods or supply of service needs a visit to the relevant definitions in the CGST Act, 2017.

Section 7(1) of the CGST Act, 2017 states that

(1) For the purposes of this Act, the expression – “supply” includes-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

Section 7(1 A) of the CGST Act, 2017 states that

(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply oi services as referred to in Schedule II.

5.12 The appellant undertakes supply of food as sale for a consideration in the course of their business. Therefore, the activity undertaken by the appellant constitutes a supply. Now, whether they shall be treated as a supply of goods or supply of services needs a reference to Schedule II, as is envisaged under Section 7(1 A) of the CGST Act, 2017.

5.13 Para 6 of Schedule II to CGST Act, 2017 states that

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:-

(a) works contract as defined in clause (119) of section 2; and

Therefore, supply of food in any manner whatsoever shall be treated as a supply of service. The principal supply is supply of food. Supply of food based on a contractual arrangement with the customers at commercial or industrial locations specified by the customers on an ongoing basis is covered under other contract food service of the Tariff Heading 996337.

5.14 Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, as amended, lists rate of tax for the heading 9963. As per the said Notification,

SI.No.	Chapter, Section or Heading	Description of Service	Rate (percent.)	Condition
7	Heading 9963 (Accommodation, food and beverage services)	(i) Supply of ‘Hotel accommodation’ having value of supply of unit, accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent.	6	–
		(ii) Supply of ‘restaurant service’ other than at ‘specified premises’	2.5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
		(iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or….	2.5	-do-
		(iv) Supply of ‘outdoor catering’ at premises other than ‘specified premises’ provided by any person …..	2.5	-do-
		(v) Composite supply of ‘outdoor catering’ together with…..	2.5	-do-
		(vi) Accommodation, food and beverage services other than (i) to (v) above	9	–

5.15 The explanation given in para 4 of the Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 20/2019-Central Tax (Rate), dated 30.09.2019 for Restaurant Service, Outdoor Catering Service, Hotel Accommodation Service is as follows: –

“(xxxii) ‘Restaurant service’ means supply by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating Joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxiv) ‘Hotel accommodation’ means supply by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including supply of time share usage rights by way of accommodation.

From the above, the following could be deduced, i.e.,

The said activity of the Applicant would not be covered under ‘outdoor catering service’ as the applicant is not involved in the preparation of food, and as the same is not an event based or an occasional service.

ii.

It is quite obvious that the service in question, will not be covered under ‘hotel accommodation service’.

iii.

Restaurant service covers only services provided by restaurant, mess or canteen, thereby, the activity undertaken by the Applicant under a contract to Corporates would not be covered under ‘restaurant service’.

5.16 As the service carried out by the Applicant does not fit into the category of services covered under SI. Nos. 7(i) to 7(v) of Notification No. 11/2017-CT(Rate), dated 28.06.2017, as amended, we are of the considered opinion that the activity of supply of food undertaken by the Applicant under a contract falls under entry No.7(vi), being the residual entry, thereby attracting GST at 18% (9% CGST and 9% SGST).

5.17 The appellant argues that the online food aggregators operating through dedicated digital applications collect GST at the rate of 5% on food supplied by restaurants and collects 18% GST on the delivery and other charges. It is noticed that CGST Act, 2017 has a dedicated section dealing with the electronic Commerce Operators (ECO), which include online food aggregators.

Section 9(5) of CGSTAct, 2017 deals with the Electronic Commerce Operator (ECO).

(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Section 2(44) defines electronic commerce as:

(44) “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

Section 2(45) defines electronic commerce operator as:

(45) “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

Notification No. 17/2017-Central Tax (Rate), dated 28.07.2017 as amended by Notification No. 17/2021-Central Tax (Rate), dated 18.11.2021, notifies that in case of supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises, the tax on intra-State supplies shall be paid by the electronic commerce operator. The rate of tax is 5% (CGST 2.5% + SGST 2.5%) without availing Input Tax Credit. It is seen that the Government has mandated the ECOs to charge a specific rate of tax and also directed that the ECOs cannot claim Input Tax Credit.

The appellant, through their submissions and during personal hearing, had not claimed that they have a digital platform through which their corporate clients order food delivery. Therefore, they cannot be treated at par with the ECOs .

5.18 The appellant relied on various AARs to drive home their argument. It is to be pointed out that Advance Rulings decisions in respect of an applicant is applicable to the said applicant alone, but the rulings have a persuasive value to them. We find that the food supplied to corporates on a continuous basis has been treated as a principal supply. The activity undertaken by the appellant does not fall under any of the category listed from SI. Nos. 7(i) to 7(v) of Notification No. 11/2017-CT(Rate), dated 28.06.2017, as amended, and therefore, entry 7(vi) was resorted to, being the residual entry of the said Notification.

5.19 The appellant’s argument that the AAR has placed undue reliance on agreement is not correct. It is to be noted that the GST law is based on documentation. Also, supply of service being intangible, a need of relying on the agreements becomes more essential.

5.20 The appellant argues that a transaction must be examined based on its dominant intention as held by the Hon’ble Supreme Court in the case of BSNL V Union of India. We find that the dominant intention test is not ignored in the present case. The dominant or principal supply in the said supply of service is supply of food. The supply of food as a supply of service is dealt with in Chapter 9963 and the relevant Tariff Heading is 996337 that deals with the supply of food based on contractual arrangements with the customers to supply food at industrial or commercial locations as specified by the customers. As the service carried out by the Applicant does not fit into the category of services covered under S1. Nos. 7(i) to 7(v) of the service rate Notification No. 11/2017-CT(Rate), dated 28.06.2017, as amended, we are of the considered opinion that the activity of supply of food undertaken by the Applicant under a contract falls under entry No.7(vi), being the residual entry.

5.21 The order has carefully considered all the facts presented before the AAR and concluded that the supplies undertaken by the appellant are classifiable under Tariff Heading 996337. It is not an artificial reclassification but is arrived at after a meticulous point wise discussion of all the aspects of the supply undertaken by the appellant on appropriate legal strength.

5.22 In fine, the Advance Ruling No. 60/ARA/2025 dated 16.12.2025 passed by the AAR is upheld, and we find no reasons to interfere with the same.

6. In view of the detailed discussion supra, we pass the following order.

ORDER

The ruling pronounced by the AAR in Advance Ruling No. 60/ARA/2025, dated 16.12.2025 is upheld and accordingly, the appeal filed by the appellant is dismissed.

Both operational models of outdoor food delivery constitute a composite Third-party food procurement and supply to corporate clients with minimal serving staff qualifies as ‘’Supply of Service taxable at 18% GST.’ under SAC 996334, attracting 5% GST’ under SAC 9

Ashwani Kumar — Sat, 20 Jun 2026 12:58:25 +0000

Both operational models of outdoor food delivery constitute a composite ‘Supply of Service’ under SAC 996334, attracting 5% GST without ITC.

Issue

Whether the two different models of food supply by an outdoor caterer—(i) with on-site serving staff, and (ii) pure delivery to a venue without staff—constitute a “composite supply” treated as a “supply of service” under the CGST Act, 2017.
What is the correct Service Accounting Code (SAC) classification and applicable GST rate for such occasional outdoor catering activities under Notification No. 11/2017-Central Tax (Rate).

Facts

The Business: The applicant prepares food at their own central premises and supplies it to clients for occasional functions held at external venues like marriage halls and exhibition centers.
Model 1 (With Service): Food is prepared off-site, transported to the venue, and served by the applicant’s deployed manpower alongside on-site event support.
Model 2 (Pure Delivery): Food is prepared off-site and logistically delivered to the customer’s location at the customer’s risk, without any on-site service or labor deployment.
The Dispute: The classification of these models dictates whether they can be taxed at a lower concessional rate of 5% (with restrictions) or fall into the residuary category of 18% GST under Heading 9963.

Decision

On Characterization as Composite Supply: Decided in favor of the assessee. In both execution models, the individual elements (food preparation, logistics, and serving/delivery) are naturally bundled in the ordinary course of business to fulfill an overall supply of food. Thus, both models constitute a “Composite Supply” and must be treated as a “Supply of Service” under Clause (b) of Paragraph 6 of Schedule II to the CGST Act.
On SAC Classification and GST Rate: Decided against the assessee (in terms of rate finality). The services do not qualify as “restaurant services” or “hotel accommodation.” Instead, they are explicitly classified under SAC 996334 as “Outdoor Catering Services.”
Applicable Tax & Conditions: The services fall squarely under Serial No. 7(iv) of Notification No. 11/2017-CT(R) (as amended), attracting GST at 5% (2.5% CGST + 2.5% SGST). This rate is mandatory and carries the rigid condition that Input Tax Credit (ITC) on goods and services used cannot be claimed. The applicant does not have the option to voluntarily opt for the 18% tax rate under the residuary entry 7(vi) to claim ITC.

Key Takeaways

Service Trumps Goods in Catering: Even when a caterer simply drops off prepared food at a venue without deploying serving staff (Model 2), the integrated elements of culinary preparation and logistical transit still elevate the transaction into a composite “Supply of Service.”
Specific Entries Overrule Residuary Entry: Where a service fits perfectly into a specific concessional entry (such as 5% for outdoor catering), the taxpayer cannot bypass it. The residual 18% tax entry cannot be selected at the whim of the assessee simply to bypass ITC restrictions.
The Cost of Concession: The 5% GST rate for outdoor catering is a conditional absolute. While it lowers the tax invoice burden for the final client, it locks out the business from utilizing any underlying Input Tax Credit (ITC) for its procurement chain.

AUTHORITY FOR ADVANCE RULING , TAMILNADU

Friends Catering CBE, In re*

B. Suseel Kumar and C. Thiyagarajan, Member

No. TN/27/ARA/2026

MARCH 26, 2026

1. M/s. Friends Catering CBE Nos. 172-175, Sarojini Street, Ramnagar, Coimbatore – 641 009 (hereinafter called as the “Applicant”) are registered under the GST Act with GSTIN 33AAHFF4730D1ZW. The applicant informed that they are engaged in providing outdoor catering services that do not involve hotel accommodation and are not located in any specified premises. Their services include two distinct categories of supply:

•

They provide composite outdoor catering services that involve both the supply of prepared food and deployment of manpower for serving and on-site event support.

•

They also undertake supply of food for occasional events where the food is prepared at their premises and delivered to the customer’s location without any involvement of labour or on-site service. The responsibility of the goods transfers at the time of dispatch or delivery, and the service does not involve any catering activity at the recipient’s premises.

2. The Applicant has made a payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017.

3. The applicant has sought advance ruling on the question on rate of GST on both the models of supply under outdoor catering services and the applicable HSN code in both the cases.

Statement of relevant facts having a bearing on the question(s) raised.

4.1 Under Statement of relevant facts having a bearing on the question(s) raised, the applicant has stated that they are engaged in providing outdoor catering services, which include both catering and labour services; that labour services are always provided in conjunction with catering services; that they also offer catering services without any labour services, where food is prepared at their premises and subsequently transported to the recipient’s location for occasional events, at their own risk; that their catering services are primarily provided for outdoor events held at various venues such as marriage halls, exhibition halls, and other similar locations for occasional functions; that they do not provide hotel accommodation services, nor are we located in any “specified premises”.

4.2 The applicant further states that as per the amended Notification No. 11/2017-CT (Rate), Entry (iv), the supply of outdoor catering services at venues other than “specified premises” and provided by suppliers who are neither:

(a)

suppliers providing hotel accommodation at specified premises, nor

(b)

suppliers located in specified premises, is subject to GST at the rate of 2.5% CGST and 2.5% SGST, provided that no credit of input tax has been claimed on the goods and services used to supply this service. Also, Entry (vi) of the same notification specifies that GST at the rate of 9% CGST and 9% SGST applies to “Accommodation, food, and beverage services, other than those listed in Entries (i) to (v) above,” without any restrictions on availing Input Tax Credit (ITC). The applicant further adds that the Explanation under Entry (vi) clarifies that the services covered by Entries (ii), (iii), (iv), and (v) will attract the respective GST rates prescribed for each category, subject to the conditions outlined in those entries. The applicant also includes that for the purpose of GST, the term “outdoor catering” includes services provided at venues such as exhibition halls, events, conferences, marriage halls, and other similar locations for occasional and event-based functions, whether held indoors or outdoors.

Interpretation of Law by the Applicant based on the statement of facts:

5.1 On interpretation of law, the applicant has stated that their services fall within the meaning of “outdoor catering” as defined in the notification, and are carried out at premises that are not “specified premises”, by a person who does not provide hotel accommodation and is not located in specified premises. The applicant opined that Entry (iv) prescribes a concessional rate of 5% GST (2.5% CGST + 2.5% SGST), subject to the condition that ITC is not availed. It is not an unconditional mandatory rate, as the applicability is conditional upon non-availment of input tax credit and Entry (vi) provides for a GST rate of 18% (9% CGST + 9% SGST) for accommodation, food, and beverage services not falling under Entries (i) to (v), with the facility to avail ITC. Further, the applicant also added that since the concessional rate under Entry (iv) is conditional, and the standard rate under Entry (vi) is unconditional (and applies to all food and catering services not choosing or not falling under concessional categories), they interpret that the applicable HSN Code is 996334 and they have option to either (a) Pay GST at 5% without availing ITC under Entry (iv), if they choose to forgo ITC, or, (b) Pay GST at 18% with ITC under Entry (vi), if they choose to avail ITC, whether or not involving Labour services.

5.2 Prima facie, we find that the queries raised by the applicant get covered under clause (b), (d) and (e) of the Section 97(2) of the CGST Act, 2017, and as such are liable to be admitted.

5.3 The applicant is under the administrative control of State Tax Authority. The concerned Authorities of the Centre and State were addressed to report the detailed remarks and no pendency report on the questions raised by the applicant in their ARA application.

5.4 Since, no remarks have been received from the Central or State GST jurisdictional Authorities, it is construed that there are no pending proceedings against the applicant on the questions raised by them in their advance ruling application.

Personal Hearing

6.1 Mr. Manoj B., Chartered Accountant appeared for the personal hearing as an authorized representative (AR) of M/s. Friends Catering CBE. The AR reiterated the submissions made in their application for advance ruling.

6.2 The AR informed that they are engaged in providing outdoor catering service under two types of supply, one of which is that they prepare the food and engage their staff and logistics to deliver and serve the food at the customers’ premises or at the event site. Another model is that they prepare food at their centralized kitchen and the customers engage their logistics and staff to deliver and serve the food at their premises.

6.3 The Members asked whether they have any accommodation services along with the catering services and whether they have specified premises, to which the AR replied in negative. The AR reiterated that they need reply to their query regarding the rate of tax on both the models of food supply adopted by them. The Members informed the AR that mere preparation of food for outward supply is also a supply of service as per Schedule II of the CGST Act, 2017, to which the AR agreed. When the Members asked about the present tax rate adopted by the applicant, the AR replied that they tax at the rate of 18% and avail Input Tax Credit (ITC) wherever supply of food, transportation and serving is involved and tax 5% without availing ITC whenever only food is prepared without involvement of transportation or any other service. The Members also asked the AR to provide a write up on the present practice adopted by the applicant in case of both the models of supply of food along with sample copies of invoices. The AR undertook to provide the write up at the earliest.

Discussions and Findings:

7.1 We have considered the submissions made by the applicant in their application, copies of the relevant documents furnished by them, the submissions made during the personal hearing. We find that the applicant claims that they are engaged in providing outdoor catering services that do not involve hotel accommodation and are not located in any specified premises and that their services include two models of supply:

•

They provide composite outdoor catering services that involve both the supply of prepared food and deployment of manpower for serving and on-site event support.

•

. They also undertake supply of food for occasional events where the food is prepared at their premises and delivered to the customer’s location without any involvement of labour or on-site service. The responsibility of the goods transfers at the time of dispatch or delivery, and the service does not involve any catering activity at the recipient’s premises.

7.2 Accordingly, the applicant has sought advance ruling on the question as to

1. Whether they have the option to either:

(a)

Pay GST at the rate of 2.5% CGST and 2.5% SGST without availing Input Tax Credit (ITC), or

(b)

Pay GST at the rate of 9% CGST and 9% SGST with availing ITC, as per Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 20/2019-Central Tax (Rate), dated 30.09.2019, effective from. 01.10.2019.

2. What is the applicable GST rate for food supply services provided for occasional events, where no labour or on-site services are involved, and the food is prepared at their own premises and transported to the recipient’s location at their own risk?

3. What is the applicable HSN Code?

7.3 The applicant is of the view that the activity undertaken by them fall within the meaning of “outdoor catering” as defined in the notification and are carried out at premises that are not “specified premises”, by a person who does not provide hotel accommodation and is not located in specified premises. The applicant opined that Entry (iv) prescribes a concessional rate of 5% GST (2.5% CGST + 2.5% SGST), subject to the condition that ITC is not availed and Entry (vi) provides for a GST rate of 18% (9% CGST + 9% SGST) for accommodation, food, and beverage services not falling under Entries (i) to (v), with the facility to avail ITC. Further, the applicant also added that since the concessional rate under Entry (iv) is conditional, and the standard rate under Entry (vi) is unconditional (and applies to all food and catering services not choosing or not falling under concessional categories), they interpret that the applicable HSN Code is 996334 and they have option to either to pay GST at 5% without availing ITC under Entry (iv), if they choose to forgo ITC, or to pay GST at 18% with ITC under Entry (vi), if they choose to avail ITC, whether or not involving Labour services.

7.4 At this juncture, it becomes imperative to ascertain as to whether the said activity of the Applicant, constitute a supply of ‘goods’, or a supply of ‘service’. Schedule II to the CGST Act, 2017 lists the activities to be treated as supply of goods, or, supply of services. In this regard, we find that para 6 of Schedule II, which discusses about ‘Composite supply’ is relevant to the issue in question, and the same is reproduced below:

“6. Composite supply: The following composite supplies shall be treated as a supply of services, namely :-

(a)

works contract as defined in clause (119) of Section 2; and

(b)

supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.”

7.5 Section 2 (30) of the CGST Act, 2017 defines ‘Composite Supply’ as:

“(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;”

7.6 The applicant prepares food at their premises and supplies it to their clients for events held at various venues such as marriage halls, exhibition halls, and other similar locations for occasional functions. The applicant adopts two models of food supply for such occasional events or functions, viz.,

(i)

they prepare the food at their premises, along with deployment of manpower for serving and onsite event support, and

(ii)

the applicant prepares the food at their premises and delivers it to the customer’s location without any involvement of labour or any other on-site service.

7.7 We find that, in the first scenario, the applicant is involved in preparation, transport and serving of food to the clients for occasional outdoor or indoor events or functions. This combination of supply of goods and services are naturally bundled resulting in an overall supply of food to their clients and so, the activity undertaken by the applicant satisfy the criteria required for arriving at a composite supply. Therefore, we are of the opinion that the supply of food undertaken by the applicant forms a ‘composite supply’ and the same is liable to be treated as a ‘supply of service’ as laid down in clause (b) to para 6 of Schedule II to the CGST Act, 2017.

7.8 In the second scenario, the applicant prepares food at their premises and subsequently transports it to the recipient’s location for occasional events, at the customer’s own risk. Here, the applicant is involved in preparation of food as well as supporting logistically by way of arranging for transport of the prepared food, albeit at the customers’ risk. Here again, we are of the opinion that since the applicant is involved in preparation of food, and in the arrangement for transportation of food, it falls within the meaning of a ‘composite supply’ and the same is liable to be treated as a ‘supply of service’ as laid down in clause (b) to para 6 of Schedule II to the CGST Act, 2017.

7.9 Having held that both the models of supply of food adopted by the applicant amounts to ‘supply of service’, it becomes imperative to ascertain the classification of service in order to determine the taxability of the service involved. In this regard, we find that the Annexure to the Notification No. 11/2017-CT(Rate), dated 28.06.2017, as amended, lists the classification of services and the extract of the relevant Chapter, Section Heading or Group, is reproduced as under :-

Annexure: Scheme of Classification of Services

Sl. No.	Chapter, Section Heading or Group	Service Code (Tariff)	Service Description
80	Group 99633		Food, edible preparations, alcoholic and non-alcoholic beverages serving services
		996334	Catering Services in Exhibition halls, Events Marriage Halls and other outdoor/indoor functions.

As per the submissions of the applicant, they provide catering services primarily for outdoor events held at various venues such as marriage halls, exhibition halls, and other similar locations for occasional functions. Therefore, as seen from the above table, the Service Accounting Code (SAC) is 996334.

7.10 Now that the SAC of the service activity is arrived at, we proceed to determine the rate of tax on the said supply of service. The rate of tax adopted for the activity of the Applicant is as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which notifies the Central Tax applicable on various services, as amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, is reproduced below:

SI.No.	Chapter, Section or Heading	Description of Service	Rate (percent.)	Condition
7	Heading 9963 (Accommodation, food and beverage services)	(i) Supply of ‘ Hotel accommodation’ having value of supply of unit, accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent.	6	–
		(ii) Supply of ‘restaurant service’ other than at ‘specified premises’	2.5	Provided that credit of input tax charged on goods and services used i supplying the service has not been taken
		(iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or	2.5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
		(iv) Supply of “outdoor catering”, at premises other than “specified premises” provided by any person other than- (a) suppliers providing “hotel accommodation” at “specified premises”, or (b) suppliers located in “specified premises”.	2.5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
		(v) Composite supply of ‘outdoor catering’ together with.	2.5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
		(vi) Accommodation, food and beverage services other than (i) to (v) above	9	–

7.11 The explanation given in para 4 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 for Restaurant Service, Outdoor Catering Service, Hotel Accommodation Service is as follows: –

“(xxxii) ‘Restaurant service’ means supply by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxiii) ‘Outdoor Catering” means supply, by way of or as part of any service of goods, being food or any other article for human consumption or any drink, at Exhibition halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature. (xxxiv) ‘Hotel accommodation’ means supply by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including supply of time share usage rights by way of accommodation.

7.12 From the above, the following could be deduced, i.e.,

Restaurant service covers only the services provided by restaurant, mess or canteen, thereby, the activity undertaken by the Applicant i.e. supply of food on occasional basis would not be covered under ‘restaurant service’.

ii.

It is quite obvious that the service in question, will not be covered under ‘hotel accommodation service’ as the applicant is not providing any accommodation in hotels, inns, etc.

iii.

The said activity of the Applicant would ideally be covered under ‘outdoor catering service’ as the applicant is involved in the preparation of food and delivering the same for outdoor events held at various venues such as marriage halls, exhibition halls, and other similar locations for occasional functions.

7.13 Therefore, the services carried out by the Applicant fit into the category of services covered under SI. Nos. 7(iv) of the service rate Notification No. 11/2017-CT(Rate), dated 28.06.2017, as amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019. We are therefore of the considered opinion that the activity of supply of food undertaken by the Applicant on occasional basis falls under entry No.7(iv) of the aforesaid notification, thereby attracting GST at the rate of 5% (2.5% CGST and 2.5% SGST) with a condition that credit of input tax charged on goods and services used in supplying the service has not been taken.

7.14 At this juncture, we find that the applicant contended and interpreted that since the concessional rate under Entry 7(iv) is conditional, and the standard rate under Entry (vi) is unconditional (and applies to all food and catering services not choosing or not falling under concessional categories), they have option to either to pay GST at 5% without availing ITC under Entry (iv), if they choose to forgo ITC, or to pay GST at 18% with ITC under Entry (vi), if they choose to avail ITC, whether or not involving Labour services. In this regard, we find that the Entry No. 7(vi) of the Notification No. 20/2019-CT(Rate) dated 30.09.2019 (which amends the original service rate Notification No. 11/2017-CT(Rate), dated 28.06.2017, reads as below:-

(3)

(4)

(5)

(vi) Accommodation, food and beverage services other than (i) to (v) above
Explanation:

(a)

For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv) and (v) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5), which is a mandatory rate and shall not be levied at the rate as specified under this entry.

(b)

This entry covers supply of ‘restaurant service’ at ‘specified premises’

(c)

This entry covers supply of ‘hotel accommodation’ having value of supply of a unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.

(d)

This entry covers supply of ‘outdoor catering’, provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’.

(e)

This entry covers composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’.

–

7.15 It could be seen from the above that the aforesaid entry 7(vi) which provides for tax at the rate of 9% (i.e., 18% overall including SGST), without any condition, starts with the phrase “Accommodation, food and beverage services other than (i) to (v) above”. Accordingly, having held already that the services rendered by the applicant gets covered under entry SI.No.7(iv), the question of application of entry SI.No.7(vi) to the instant case, does not arise at all. Apart from the same, clause (a) of the Explanation appended to the said entry, clearly states that in respect of supplies covered by items (ii), (iii), (iv) and (v), central tax prescribed against them in the respective column, i.e., 2.5% (5% overall GST) shall be payable, subject to conditions specified against them, and that the same is a mandatory rate and shall not be levied at the rate as specified under this entry. It could also be seen from the other inclusive clauses of the Explanation, that they all relate to services other than the one being discussed in the instant case, like (b) restaurant service, (c) hotel accommodation, (d) supply of ‘outdoor catering’ provided by suppliers providing ‘hotel accommodation’, (e) supply of ‘outdoor catering’ together with renting of premises, etc. It is therefore clear that the rate of 9% is applicable only in respect of specific cases, and for all the other cases, the rate specified against the respective entries becomes mandatory, and that the option to pay GST at the rate of 9% (18% overall) does not lie with the taxpayer in such cases.

8. Based on the above discussion, we rule as under:

RULING

(a) The applicant is required to pay tax on the supply of service involving food, at the rate of 5% (2.5% CGST and 2.5% SGST) as per S1. No. 7(iv) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, with a condition that credit of input tax charged on goods and services used in supplying the service has not been taken.

(b)

The applicant does not have an option of paying GST at the rate of 9% CGST and 9% SGST, along with availment of ITC.

The applicable GST rate for food supply services provided for occasional events, where no labour or onsite services are involved, and the food is prepared at applicant’s premises and transported to the location at recipient’s risk, is 5% (2.5% CGST and 2.5% SGST) as per SI. No. 7(iv) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, with a condition that credit of input tax charged on goods and services used in supplying the service has not been taken.

The applicable HSN Code (SAC) for both the models of supply of food carried out by the applicant is 996334.

Show-cause notices issued after the expiry of the High Court’s strict 12-week remand deadline are legally void.

Ashwani Kumar — Sat, 20 Jun 2026 12:51:46 +0000

Show-cause notices issued after the expiry of the High Court’s strict 12-week remand deadline are legally void.

Issue

Whether show-cause notices issued under Section 271D read with Section 260A are legally sustainable when the 12-week time limit explicitly mandated by the High Court for passing a fresh order under remand has completely expired.

Facts

The Original Penalty: The assessee originally challenged a penalty order dated June 26, 2025, passed under Section 271D (levied for taking loans/deposits in cash), on the grounds that the principles of natural justice were violated because no personal hearing was granted through video conferencing.
The High Court Mandate: On August 18, 2025, the High Court set aside the penalty order and remanded the matter back to the tax authorities. The Court gave a strict directive: provide a fresh opportunity of hearing and pass a fresh order within exactly 12 weeks from the date of receipt of the Court’s order.
Post-Remand Delay: Following the remand, the department issued a show-cause notice on October 27, 2025. The assessee submitted a reply on October 30, 2025, and subsequently sent reminders on November 15, 2025, and December 15, 2025, explicitly requesting a personal hearing via video conferencing.
Expired Timeline: Instead of concluding the case within the 12-week window, the department remained inactive and then issued yet another show-cause notice on February 13, 2026, well after the court-mandated deadline had lapsed.

Decision

On Binding Nature of Court Timelines: Decided in favor of the assessee. When the High Court fixes a precise, time-bound frame (12 weeks) to cure a natural justice defect and pass a fresh adjudication order, the tax department is legally obligated to complete the entire exercise within that period.
On Quashing the Notices: Because the 12-week timeframe had completely lapsed without a final order being passed, the department lost its operational window to act under the terms of that specific judicial remand. Consequently, the delayed, impugned show-cause notices dated October 27, 2025, and February 13, 2026, were quashed and set aside.

Key Takeaways

Judicial Deadlines are Absolute: Time limits prescribed by a High Court in a remand order are mandatory, not directory. The Revenue cannot treat court-mandated timelines as flexible internal administrative schedules.
Erosion of Jurisdiction due to Inaction: If the tax department fails to finalize a remanded assessment or penalty within the specific timeline granted by a constitutional court, its authority to keep issuing consequential show-cause notices on that exact issue effectively expires.
Taxpayer Right to a Speedy Trial: The decision reinforces that taxpayers cannot be kept in a perpetual state of uncertainty through successive, delayed notices when the delay is entirely attributable to the system’s failure to schedule standard procedures like video-conferencing hearings.

HIGH COURT OF GUJARAT

Kirti Shankarlal Patel

Assessment Unit, Income-tax Department, Government of India

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 2988 of 2026

APRIL 20, 2026

Tushar Hemani, Sr. Adv. and Ms Vaibhavi K Parikh for the Petitioner. Karan G Sanghani for the Respondent.

ORDER

A.S. Supehia, J.- The present writ petition has been filed by the petitioner for following prayer :

“(a) quash and set aside the impugned Show Cause Notices dated 27.10.2025 and 13.02.2026 at ANNEXURE “A-1” and ANNEXURE “A-2″ respectively, to this petition along with the entire penalty proceedings reinitiated vide this Hon’ble Court’s Order dated 18.08.2025.”

2. The brief facts leading to filing of the present writ petition are as under:

2.1 The petitioner submits that the petitioner had challenged the Order dated 26.06.2025 passed under section 271D of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short) Act on the grounds of violation of principles of natural justice, without granting opportunity of personal hearing through Video-Conferencing vide Special Civil Application No.10058 of 2025. Consequently, the above matter of the petitioner was listed for final hearing on 18.08.2025 wherein this Court without going into the merits of the case quashed and set-aside the Order passed under section 271D of the Act dated 26.06.2025, and the matter was remanded back the matter to the Respondent Assessing Officer only on the ground of breach of principles of natural justice in order to provide fresh opportunity of hearing to the petitioner and thereafter again pass Order under section 271D of the Act in accordance with the law within 12 weeks from the date of receipt of copy of the Order.

2.2 The petitioner submits that the petitioner received showcause notice under Section 271D read with Section 260A of the Act dated 27.10.2025. The petitioner, thereafter, vide letter dated 30.10.2025 responded to the show-cause notice. Since there was no response from the respondent authorities, the petitioner again wrote a reminder letter dated 15.11.2025, reiterating the request that his case may be transferred to the jurisdictional Joint Commissioner of Income Tax (JCIT), Range 2(1), Surat. Since there was no response, the petitioner having waited for one more month, he once again filed a reminder letter dated 15.12.2025. The petitioner also requested for personal hearing through video-conferencing.

2.3 After almost two months from the last letter, the petitioner received a show-cause notice under Section 271D read with Section 260A of the Act, on 13.02.2026. The petitioner has assailed the same before this Court on the ground that the show-cause notice issued on 13.02.2026, is beyond the period of 12 weeks, as directed by this Court.

3. Mr. Tushar Hemani, learned Senior Advocate appearing for Ms. Vaibhavi Parikh, learned advocate for the petitioner, while placing reliance on the judgment passed in Gryphon Ceramics (P.) Ltd. v. Asstt. CIT [Special Civil Application No.5 of 2025 , dated 20-1-2026] in an analogous issue has submitted that the impugned show-cause notices dated 27.10.2025 and 13.02.2026 may be quashed and set-aside since the time limit granted by this Court has elapsed.

4. In response to the aforesaid submissions, learned Senior Standing Counsel Mr. Karan Sanghani has tendered affidavitin-reply dated 17.04.2026, the same is ordered to be taken on record. He his unable to dispute that as on today, no orders are passed, as directed by this Court and the time limit of 12 weeks for passing the assessment order has already been lapsed. However, he has submitted that the Faceless Assessment Officer (FAO) submitted a proposal on 02.02.2026 to the competent authority for transferring out the case to the Jurisdictional Assessing Officer (JAO) and in this regard he also raised a ticket to the Income Tax Business Application (ITBA) help-desk on 03.02.2026, however, while clicking on ‘manual order upload’ tab, the system was showing the PAN of the petitioner as not being the jurisdiction of FAO and, on 23.02.2026, the ITBA help-desk replied that functionality for passing any order for setting aside the penalty by the FAO is not available in ITBA and thus, the FAO was not in a position to pass the order and in the meanwhile, the FAO had issued another show-cause notice to the petitioner on 13.02.2026.

5. Having heard the learned advocates for the respective parties at length, it is not in dispute and it is established from the plaint that the petitioner initially filed the writ petition being Special Civil Application No. 10058 of 2025 challenging the order dated 26.06.2025, passed under Section 271D of the Act on the grounds of violation of principles of natural justice. The said writ petition was disposed of by order dated 18.08.2025 by the Coordinate Bench of this Court by recording thus:

“In view of the above undisputed facts, the impugned order dated 26.6.2025 passed under Section 271D of the Act is hereby quashed and set-aside and the matter is remanded back to the respondent Assessing Officer to provide fresh opportunity of hearing to the petitioner and thereafter pass order under Section 271D of the Act, in accordance with law. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order.”

6. It is an accepted position that the limitation of 12 weeks for passing the order has expired and as on today, no such order has been passed. No attempt has been made by the respondent department to file any application seeking extension of time. The respondent Assessing Officer whiled away the time and though notices were issued to the petitioner on 27.10.2025 and 13.02.2026, no final orders are passed. It is also noticed by us that the petitioner had, time and again, requested the respondent authorities to do the needful and grant him opportunity of personal hearing, however, no reply was received in response to such reminders sent by the petitioner and hence, on the sole ground and in non-compliance of the directions issued by this Court and the limitation of 12 weeks having been over, we have no option but to quash and set-aside the show-cause notices dated 27.10.2025 and 13.02.2026 and accordingly the show-cause notices are quashed and set-aside. The petition stands allowed.