Planning an event involves many decisions, and managing costs is crucial.
For businesses providing event services, structuring offerings correctly under GST can significantly impact the tax rate and final cost.
In a recent ruling, the West Bengal Authority for Advance Rulings (AAR) helped Tollygunge Club in Kolkata do just that by applying a reduced GST rate of 5% on certain bundled services.
Here’s what happened and what it means for future event planning.
- The Case: What was the Tollygunge Club trying to achieve?
Tollygunge Club provides event-related services like renting spaces and offering catering for gatherings, weddings, and functions. The club wanted to apply a lower GST rate by bundling venue rental with catering services and treating it as “outdoor catering” at non-premium rates.
- The Law: How does GST treat bundled services?
Under GST, if two services are provided together (like renting a venue with catering), they can be classified as a “composite supply.” If these services are naturally bundled, they are taxed together based on the principal supply —in this case, Outdoor Catering.
- The Ruling: When does 5% GST apply?
The AAR considered the Tollygunge Club’s request and clarified the following:
- Composite supply confirmed: Renting a venue with catering qualifies as a composite supply, allowing a single GST rate of principal supply.
- Outdoor catering classification: Event-based catering services, even within club premises, can be treated as “outdoor catering,” making them eligible for the 5% GST rate, as long as they are not “premium” (rooms with tariffs below ₹7,500 per day).
- Rate varies with room tariff: When room tariffs exceed ₹7,500 per day, the GST rate shifts to 18% with eligibility for input tax credit (ITC).
Question: Could categorizing event services differently impact how businesses manage GST credits?
Answer: Yes, the choice between a lower GST rate without ITC and a higher rate with ITC can significantly affect a business’s tax planning. A business might prefer the 5% rate without ITC for competitive pricing on customer-facing services where input costs are low, making the savings on output tax more valuable.
On the other hand, if input costs are high—such as for lavish décor, catering materials, or facility maintenance—the business might choose the 18% rate with ITC to offset input taxes and reduce overall expenses.
This decision hinges on balancing immediate customer affordability with long-term tax savings, which can vary by event type and client budget.
Key Takeaways:
This ruling empowers event providers with flexible GST options: a 5% rate without ITC for budget-friendly packages or an 18% rate with ITC for premium offerings.
Businesses can now strategically structure pricing to appeal to different client segments, optimizing costs and maximizing market reach.
Summary Table: GST Rates for event & standalone services
| Service Type | Applicable GST Rate | Input Tax Credit (ITC) |
| Bundled Accommodation + Catering (Non-premium) | 5% | No ITC |
| Bundled Accommodation + Catering (Premium) (Rooms above ₹7,500/day) | 18% | Eligible for ITC |
| Standalone Catering Service (Outdoor) | 18% | Eligible for ITC |
| Standalone Accommodation Services | 18%/12%
(Less than or equal to 7500 per day-12%/ otherwise- 18%) |
Eligible for ITC |