Canteen services provided by outside vendors in offices and factories will attract 18 per cent GST, said the Authority for Advance Rulings (AAR).

The Gujarat Bench of the AAR passed its order in an application filed by Rashmi Hospitality Services sought an advance ruling on whether the rate of tax on supplies made to non-airconditioned canteen of offices would be taxed at GST of 12 per cent or 18 per cent.

The AAR said that the catering service provided by Rashmi Hospitality to the recipient who has an in-house canteen at their offices or factories where the meals, snacks, tea are consumed by employees or workers, do not alter the nature of the service provided by the hospitality company.

"The supply of services by M/s Rashmi Hospitality Services Pvt Ltd is covered under (GST Act)... attracting Goods and Service Tax at 18 per cent (CGST of 9 per cent + SGST of 9 per cent)," the AAR said.

EY Partner Abhishek Jain said, "The said Ruling would open up a pandora box for industries as well as employees, with increased cost of meals for employees or for businesses; where the cost of meals is borne by businesses and corresponding credit of such input GST being restricted," he said.

AMRG & Associates Partner Rajat Mohan said the ruling would negatively affect the cost of food for such companies. "Companies would intend to pass on the incremental value to employees in the long run, tumbling their take-home salaries," he added.