Clarification on GST rate applicable on supply of food and beverage services by educational institution.

Circular No.: 85/04/2019-GST
Date of Circular: 1st January 2019
Relevant Sections and Rules:

• CGST Act, 2017: Section 168(1)
• Notifications Referenced:
  • Notification No. 11/2017-Central Tax (Rate), Sl. No. 7(i)
  • Notification No. 12/2017-Central Tax (Rate), Sl. No. 66
  • Notification No. 27/2018-Central Tax (Rate)
  • Notification No. 28/2018-Central Tax (Rate)

Summary of Circular:

This circular clarifies the GST applicability on the supply of food and beverage services by educational institutions to their students, faculty, and staff, resolving the ambiguity created by references in two different notifications.

1. Conflict in Interpretation – Clarified:
   • Notification No. 11/2017-CT(R) prescribes 5% GST on supply of food/beverages by canteens/mess of institutions such as schools/colleges.
   • Notification No. 12/2017-CT(R), Sl. No. 66 exempts services provided by educational institutions to students, faculty, and staff.
   • It is clarified that there is no conflict:
     • If service is covered under exemption notification, it is exempt even if a GST rate is prescribed elsewhere.

2. Exemption for Services by Educational Institutions:
   • Supply of food and beverages by an educational institution itself to its students, faculty, and staff is exempt from GST under Sl. No. 66 of Notification No. 12/2017-CT(R) with effect from 01.07.2017.
   • This is because the description in the exemption notification clearly covers all such services irrespective of indicative classification codes.
3. Taxable Supplies by External Vendors on Contract:
   • If food and beverages are supplied by an external party (not the educational institution), even under a contract with the institution, such supply is taxable at 5% GST.
4. Amendments Made for Clarity:
   • Explanation 1 to Entry 7(i) of Notification No. 11/2017-CT(R) amended (via Notification No. 27/2018) to omit “school, college”, to avoid misinterpretation.
   • Heading 9963 inserted against Entry 66 of Notification No. 12/2017-CT(R) via Notification No. 28/2018, to reinforce the coverage of food services by educational institutions.

Source: Circular No.: 85/04/2019-GST