GST Rates for Institutional Canteen Services and Food Transport
Institutional canteen food is taxed at 5% GST, but adding separate transport charges may increase the entire bill to 18%.
- Ruling
- TSAAR Order No. 12/2018 dated 26-09-2018
- Authority
- 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
- Routine canteen food in institutions is taxed at 5% GST.
- This 5% rate applies without claiming input tax credit.
- Transporting food for a fee is treated as a composite supply.
- Composite food and transport services are taxed at 18%.
In short
Prism Hospitality Services asked the Telangana Authority for Advance Ruling (AAR) how to tax their canteen food and food transport services. The authority had to decide if these services qualify for a lower tax rate or if they fall under higher catering categories.
What has changed
How it worked before
Businesses were often unsure if institutional food services qualified for the lower 5% rate or if ancillary charges like transport would change the tax classification of the entire contract.
What has changed
The authority ruled that while canteen food is taxed at 5%, charging separately for transport makes the whole service a composite supply. This means the entire contract value is taxed at 18%, the rate for outdoor catering, rather than just the food portion.
Who this affects
Canteen operators, mess service providers, and businesses supplying food to offices, factories, or colleges.
An example
A canteen operator provides daily lunch to a corporate office and charges a separate fee for delivering the food from their kitchen. Under this ruling, the entire invoice for both food and delivery would likely be taxed at 18%. If they only provided the food without the separate transport charge, the food portion might qualify for the 5% rate.
What you should do
Review your service contracts to see if you charge separately for transport. Remember that an Advance Ruling only binds the business that asked and its local tax office; it is not a law that automatically applies to your specific business.
If you do nothing
If you apply the 5% rate to a contract that is actually an 18% composite supply, you risk a tax shortfall. A tax officer may demand the unpaid 13% difference plus interest and penalties during an audit. Do not assume this ruling protects you from your own tax officer's assessment.
The terms explained
- Composite supply
- A package of two or more services that are naturally bundled together and provided as a single transaction. The tax rate of the main service applies to the entire package.
- Input tax credit
- The tax a business pays on its own purchases that it can use to reduce the tax it owes on its sales.
- Advance ruling
- A formal decision from tax authorities on how GST applies to a specific business situation. It is only legally binding for the business that requested it.
The ruling in detail
Authority for Advance Ruling
M/s. Prism Hospitality Services (P) Ltd
TSAAR Order No. 12/2018 dated 26-09-2018 · Telangana
Questions before the authority
- What is the rate of GST to be levied on the activities of canteen services, mess operations, and food supply in various institutions as described in the application?
- What is the rate of GST to be levied on the activity of providing transport services for carting food from one building to another where separate transport charges are levied?
Facts
The applicant provides canteen and mess services to corporate offices, educational institutions, and training centers, where food is prepared and sold on a regular daily basis. In some instances, they also transport food from a central kitchen to client premises and charge separate fees for this transportation. The applicant sought clarification on the applicable GST rates for these various food supply and transportation activities.
Ruling
| Question | What the authority ruled |
|---|---|
| Canteen and mess food supply | 5% GST No input tax credit allowed; must not be event-based |
| Transportation of food | 18% GST Treated as a composite supply with food as the principal supply |
The authority ruled that the supply of food in canteens of offices, factories, hospitals, and colleges on a contractual basis is taxable at 5% GST (2.5% CGST + 2.5% SGST) without input tax credit. For the transportation of food, the authority determined it constitutes a composite supply with the food service, making the entire transaction taxable at the 18% rate applicable to outdoor catering.
Reasoning
The ruling relies on Notification No. 13/2018-Central Tax (Rate) which covers the supply of food in institutional canteens. The authority determined that such services are taxable at 5% provided they are not event-based. Regarding transportation, the authority applied Section 8 of the CGST Act, classifying the service as a **composite supply** where the food service is the principal supply. Consequently, the entire transaction attracts the **highest rate of tax** applicable to the principal supply, which is 18% for outdoor catering.
Provisions relied on
- Section 8 of the CGST Act
- Section 96(1) of the TGST Act
- Section 97(1) of the TGST Act
- Section 100(1) of the CGST/TGST Act
- Notification No. 13/2018-Central Tax (Rate) dated 26.07.2018
- Notification No. 11/2017-CT (Rate) dated 28.06.2017
- Notification No. 46/2017-CT (Rate) dated 14.11.2017
- Circular No. 28/02/2018-GST dated 08-01-2018
For the practitioner
This ruling clarifies that routine institutional canteen services are taxed at a concessional 5% rate, provided they are not event-based. Practitioners should note that adding ancillary services like transportation to a food contract may trigger a higher 18% tax rate on the entire gross amount due to the **composite supply** rules. It does not apply to event-based catering, which remains subject to standard outdoor catering rates.
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/AAR/tsaar_12.2018_26.09.18.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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