GST on Catering Services and Banquet Services

The change was very sudden as the Indian economy, on July 1, 2017, transitioned to GST because of several factors. These changes affected the hotel, event management, catering, and banquet sectors, all these being important for the organization of events like marriages, conferences, and social get-togethers. It is most helpful for businesses, consumers, and professionals working in the industry to know the taxable nature of these services. Therefore, let us know about the GST on Catering Services and Banquet Services.

What are Catering Services?

Catering services are rendered by a caterer for providing food and beverages for functions like weddings, parties, and conferences. Such services can be provided by registered caterers and unregistered caterers, respectively, thus affecting their GST rates. 

Categories of Catering Services are:

• Outdoor Catering: It is offered at events taking place outside the restaurant location.
• Indoor Catering (Restaurants, Hotels, Banquets): Services provided at a designated venue.
• Event Catering: Catering options for major occasions personalized to meet unique requirements.
• Takeout or Home Delivery: Any kind of arrangement where meals are prepared and it is delivered to the customer's location.
• Cloud kitchens or online food delivery: Restaurant kitchens that prepare food at home and then deliver it to customers who order it online.

What are Banquet Services?

Banquet Services mean all services rendered that give a pleasant ambience and smooth dining experience during such major events as weddings, corporate gatherings, or celebrations. The particular type of service given dictates the applicable tax rate.

Categories of Banquet Services are:

• Food menu
• Decoration
• Event Coordination
• Audio-Visual Services

GST on Catering Services

Particular applicability of GST on catering depends upon certain factors, such as location, type of service offered, whether it is an air-conditioned service, etc.

• GST Rate of 5%: It covers catering services in India concerning indoors and outdoors. If food is served without alcohol being served, the lesser rate of 5% is applicable. The offerings included in this category are considered as fundamental restaurant services. GST registration is pertinent for those offering services. 

• GST Rate of 18%: GST Rate 18% applies to specific caterers who render a premium service, for example, air-conditioned facilities and the serving of alcohol.

GST Rates for Different Restaurants

• Independent Restaurants: 5% GST (regardless of their ability to claim input tax credit (ITC) or not).
• Hotel dining venues with rates below ₹7,500 per night: 5% GST. 
• Outdoor catering services: 5% GST applies to events at hotels with room rates below ₹7,500 (excluding ITC).
• Hotels that charge more than ₹7,500 per night for rooms have restaurants that are liable for 18% GST (including ITC). 
• Outdoor catering in hotels with room rates exceeding ₹7,500: 18% GST (including ITC).

Catering fees can include food, beverages, and possibly service charges. Now, following the implementation of GST, the sources must differentiate the expenses for items such as food and services, with taxes being applied accordingly.

GST on Banquet Services

The tax rate for Banquet Services may fluctuate based on the particular characteristics of the service offered.

Hotel Banquet Services

If an event planner uses hotel services for banquets, an 18% GST will be charged on the total amount paid. The overall sum comprises:

• Venue charges
• Service fees (such as employee services)
• Extra offerings such as meals, drinks, and decorations

Independent Banquet Locations (Outside of Hotels):

The charges for the venue and staff services are subject to an 18% GST.

However, regarding the food and drinks offered at the event, a 5% GST is applied to the expenses incurred for them. A few illustrations include:

If the venue is booked and there is no catering included:

• Only the rent of the venues is subject to GST (18%).

If there is availability of food and drinks:

• Venue rental and service fees will be subject to an 18% GST.

• Food and beverage charges will be subject to a 5% GST. 

GST Structure on Catering and Banquet Services

The offerings of Catering and Banquet can be categorized using a system known as HSN (Harmonized System of Nomenclature). Here are the primary HSN codes for catering and banquet services:

• HSN 996331: Comprises offerings like cafes, dining in rooms, and food delivery options.
• HSN 996334: Relates to weddings, celebrations, showcases, and various special occasions.
• HSN 998553: Encompasses bookings for conference or convention venues.
• HSN 997212: Refers to services connected with the leasing or renting of non-residential properties, encompassing conference spaces or banquet facilities.

Effects of GST on Catering Services and Banquet Services in India

Modifications to the tax system through the implementation of GST influence pricing and consumer conduct:

• Increased Expenses for Clients: Prior to the introduction of GST, banquet and wedding halls were subject to various tax regimes. With banquet halls and catering services now subjected to an 18% GST rate, customers must now pay increased prices. This is why now the rental, food, decorating or extra services charged by the venue include GST. 
• Input Tax Credit (ITC): An ITC entitles a business to make a partial recovery of its expenses incurred when buying commodity goods and services mainly for business purposes.This lessens the total tax load for companies and maintains prices more reasonable even with the increased tax rate. However, companies applying reduced GST rates (such as 5%) are not eligible for this advantage.
• Pricing Transparency: The introduction of GST has made pricing clearer. As the GST rate for banquet services stands at 18%, companies must present the invoices, allowing customers to see precisely how much tax they are contributing to their event expenses.
• Shifts in Consumer Behaviour: With the new tax, consumers may be more careful with their finances when planning an event. They may seek out less expensive locations or catering choices. Catering and banquet service providers must find a pricing balance to remain competitive while dealing with the effects of GST.
• Streamlined Tax System: At first, numerous taxes applied to banquet and catering services, making pricing complex. The recent general indirect tax has streamlined the tax system, but consumers might still face significantly higher costs because of the 18% charge on services.

Conclusion

Indeed, GST has contributed a lot in improving the catering and the banquet services industry by streamlining the tax and helping in establishing transparency. It has simplified taxation, but at the same time, it has brought some problems, like increased tax rates and complicated compliance. Hence businesses need to be very mindful, adopt sound practices, and leverage technology so that it can best navigate them within the GST landscape.

The potential of GST understanding within consumers is to facilitate the informed decision-making during event planning. All these unfold to be an adjustment for the stakeholders in the catering and banquet industry in ensuring they are complying with the evolution of the framework for such sectors for more growth and sustainability.