GST on food supply chain management services for corporate clients
The Appellate Authority for Advance Ruling ruled that managing food logistics for corporate clients is a service taxed at 18%, not a supply of goods.
- Ruling
- Order-in-Appeal No. AAAR/06/2026(AR) dated 08.05.2026
- Dated
- 08 May 2026
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Frutta Services acts as an intermediary between kitchens and corporate clients.
- The authority classified the activity as a composite supply of services.
- The business must pay 18% GST under the residual service entry.
- The activity does not qualify as restaurant or outdoor catering services.
In short
The company asked if their role in managing food supply chains for corporate clients should be taxed as a supply of goods or services. The Appellate Authority for Advance Ruling (AAAR) decided that because the company manages quality, logistics, and menus, they are providing a service rather than selling goods.
What has changed
How it worked before
Businesses in this sector were often unsure if they should classify their activities as trading in goods or providing catering services, leading to inconsistent tax treatment.
What has changed
The ruling confirms that such intermediary food management is a composite supply of services taxed at 18%. This means businesses cannot claim the lower tax rates often associated with restaurant or catering services.
Who this affects
Logistics providers, food aggregators, and supply chain managers who coordinate food delivery for corporate offices.
An example
Imagine a company, 'QuickMeal Logistics', that coordinates food delivery from various kitchens to corporate offices. They manage the menu and quality checks just like Frutta Services. Based on this ruling, they should classify their work as a service and charge 18% GST, rather than attempting to classify it as a supply of goods.
What you should do
Review your service contracts to see if your responsibilities match this ruling. Remember, an advance ruling only binds the company that asked and its specific tax office; it is not a general law for all businesses.
If you do nothing
If you incorrectly classify your supply as goods and pay a lower tax rate, you risk a tax demand notice for the difference. Tax officers may also impose interest and penalties for short-payment of GST. Relying on a ruling that does not apply to your specific contract can lead to costly disputes.
The terms explained
- composite supply of services
- A package of services provided together that are naturally bundled and cannot be separated, taxed as a single service.
- residual entry
- A catch-all tax category used for services that do not fit into any specific, named service classification.
- intermediary
- A person or business that arranges the supply of goods or services between two other parties.
The ruling in detail
Appellate Authority for Advance Ruling
M/s. Frutta Services Private Limited
Order-in-Appeal No. AAAR/06/2026(AR) dated 08.05.2026 · Tamil Nadu
Questions before the authority
- Whether the applicant can claim input tax credit (ITC) and charge the client according to the category of supply of goods.
Facts
The applicant is engaged in the supply of food and beverages to corporate clients, acting as an intermediary between third-party kitchens and the clients. They do not manufacture or prepare the food themselves but manage the logistics, quality assurance, and delivery of the food to the client's premises. The applicant sought a ruling on whether this activity constitutes a supply of goods or a supply of services and the applicable tax treatment.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification and taxability of food supply | The activity is a composite supply of services taxable at 18% (9% CGST and 9% SGST) under SAC 996337. The applicant is eligible to avail ITC on the inward supply of goods/services. |
The Appellate Authority upheld the original ruling, confirming that the applicant's activity is a composite supply of services rather than a supply of goods. Consequently, the applicant is not permitted to charge GST as a supply of goods and must pay tax at the rate of 18% under the residual entry for services.
Reasoning
The Authority determined that the applicant's role involves more than mere aggregation, as they manage menu finalization, quality assurance, and delivery logistics under contractual agreements. Relying on **Schedule II of the CGST Act**, the supply of food in this manner is treated as a supply of service. Since the activity does not fit into specific categories like restaurant or outdoor catering services, it falls under the **residual entry** of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate. The Authority also noted that the applicant does not qualify as an Electronic Commerce Operator.
Provisions relied on
- Section 7(1) of the CGST Act, 2017
- Section 7(1A) of the CGST Act, 2017
- Section 17(5)(b)(i) of the CGST Act, 2017
- Schedule II of the CGST Act, 2017
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This ruling clarifies that intermediaries managing food supply chains for corporates are providing a **composite supply of services** rather than trading in goods. It settles that such activities are subject to the 18% residual service tax rate, effectively denying the lower tax rates applicable to restaurant or catering services. Practitioners should note that this decision hinges on the specific contractual obligations regarding quality and logistics management.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2026-06/frutta_services_private_limited_aaar_order.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.