One of the important decisions for Goods and Services Tax has come from the Court of West Bengal, related to that offering bundled services of renting premises along with catering service. This ruling issued by the West Bengal Authority for Advance Ruling (AAR) states that such services which include premises rent along with catering at nomenclatured premises have attracted a 5% GST rate. Such an update is more significantly important to the event management company, banquet hall as well as the others renting spaces along with extra added catering service. Well, let’s dive into what it means, to whom it is relevant, and how businesses might effectively manage these new requirements.

Background of the GST Ruling

India under GST imposes different rates for various services or types of products. This latest order of the AAR has clarified that if a business provides renting services along with catering services together and does so at a place which is not especially notified, then 5% GST is applicable. It related to a query raised by a business enterprise before the AAR about GST liability. The issue is whether or not the combined service of renting and catering falls under a single supply with one GST rate or whether this aspect should be divided into two separate services: rental and catering. Instead, the determination classified such joint services as “composite supplies,” where the entire package would fall under a 5% GST rate.

What Are Bundled Services?

To understand the ruling, it would be important to know what services are classified as bundled or composite under GST laws. Composite or bundled services are essentially offering multiple services as a single package, of which one service represents the principal or dominant part of the offer. In the case at hand, renting the premises is deemed to be the principal service, and catering would be an additional part of the service bundle.

This makes the definition of a bundled service relevant because GST laws are different depending on whether it is standalone or composite. For composite services, the tax rate depends on the principal component of the service. Renting is consequently the primary service being sold in the package. As such, it is subject to a GST rate of 5% for the total package rather than a specific rate for catering services.

 Conditions for Eligibility for the GST Rate

To benefit from this 5% GST rate, the following conditions must be complied with:

1. Non-specified Premises: It occurs in a non-specified premise. The term usually refers to any location not particularly registered for the activity in question, which may include venues leased on a temporary basis for events.
2. Catering to be Tied-In: Catering must form part of the package deal. Without catering, this would simply become a rental service and could actually carry a different GST rate.
3. Not Separate Contracts: It should be provided under one contract that includes both rental and catering services. If there are two separate services with two different contracts, then these will probably attract tax at different rates.

This way, by satisfying these conditions, businesses will be able to avail the 5% rate of GST for the entire packaged service. This packaging also makes the calculations simpler in the sense that all the products come into one single category under the attached GST rate rather than dealing with various rates.

Background:

The West Bengal AAR ruling on bundled services will include a huge number of establishments operating within the state of West Bengal, banquet halls, party organizers, among others, that offer spaces for hire with catering facilities. The combined application of 5 percent GST would likely suggest a decrease in the overall GST chargeable to clients whenever they hire spaces coupled with catering facilities.

Under this, the company needs to very carefully package its services so that they fall within the criterion of the AAR. It is equally important to document that as one single package so there’s less chance of complications at the time of GST filing or any audit.

This ruling might also impact the strategy with regard to client pricing. Businesses may gain a competitive edge in pricing services to customers if they can offer the bundled service at a lower GST rate. The cost of savings in GST may allow businesses to attract more customers.

How to Comply

Businesses operating in West Bengal have to do the following in order to comply with the new GST ruling:

1. Make sure to structure the service packages carefully: If you are doing rental and catering in a package, make sure this is packaged together.
2. Maintain documentation: All agreements should reflect a bundled service structure, so that during an audit, you will be able to back up the 5% GST rate.
3. Seek the tax expert: GST laws are complex and require a timely basis. Consulting a GST specialist or tax advisor will ensure that you comply and benefit any tax you deserve.

CONCLUSION :

The much-needed clarity and relief for the businesses were brought about by this ruling of the West Bengal AAR of 5% GST on the bundled services of renting premises with catering. Being able to take advantage of a lower tax rate for composite services while simplifying compliance efforts will depend on following guidelines and meeting the composite service criteria. But with Saptax Hub, you’ll be sure to stay in line while optimizing your tax saving and GST registration in Delhi.

For customized guidance and sound assistance, log onto Saptax Hub Official website. As the best CA firm in Delhi, their team will guide you through the complexities of GST compliance.