Applicability of Service Tax on factory Canteen without facility of Air Conditioned.

[vinay wakde]

Ours is a public limited company. We have engaged a Catering Contract to supply and serve the food to the employees in our factory canteen. The canteen building/eating joint is non Air Conditioned. We understand that w.e.f. 01.04.2013 Service tax is applicable, if the place i.e. canteen/eating joint is provided with the Air condition facility.

Kindly give your views about charging the service tax by the service provider in their bills after 01.04.2013

Regards,

VINAY

[NANDKUMAR SAGWEKAR]

Dear Mr. Vinay Wakde

In your case you are having  a factory canteen for your employees and services are provided by canteen contractor.

If the said canteen contractor is engaged in providing services which are inclusive of food i.e. supply of food and provision of services , then your contractors has to charge , recover and pay the service tax @ 7.42%. ( 12.36% x 60% )

If he is charging separately for food and services , then he has to charge the service tax on services charges @ 12.36% and charge MVAT ( regular rate 12.50% on value of goods  or composition scheme @ 5% on total value of bill before service tax ) .

 

Thanks

 

ANAND M SHEMBEKAR

COST ACCOOUNTANT

cell 9421187122

[NANDKUMAR SAGWEKAR]

Dear Mr. Vinay

If you are recovering the amount from the employees , then I think you have to pay the service on recovery part.

Thanks

 

ANAND M SHEMBEKAR

COST ACCOUNTANT

CELL 91-9421187122

[YAGAY andSUN]

Applicability of service tax on the recovery by the employer from employees has not been notified by the Government as yet.  Hence, no need to pay the service tax on such recoveries.

[Yelamanchili Satya Koteswara Rao]

We have a canteen at our EOU premises too to cater to the needs of our Employees. But, the scenario is slightly different. There is no contractor, the canteen is being run by the Company with its own employees. The food provided ( including to the hostlers ) to the employees is given subsidy. That is if the Breakfast and two meals per day is costing approximately Rs. 1800/- per month, we charge a flat rate of Rs.850/- per month to the employee and the balance is borne by the Company.

I wish to know what are the Service Tax and Sales Tax implications in this kind of canteen operations. We will be grateful to those who can educate us in this regard.

best regards

YS Koteswara Rao

 

 

AI Summary

Service tax on canteen services depends on air-conditioning and whether charges are for service or supply of goods. Applicability of service tax on factory canteens depends on whether the contractor's activity is a composite supply inclusive of food or is invoiced separately; service tax applies to the service component while VAT applies to goods. The presence of air conditioning at the eating joint is treated as a material factor for tax treatment. Recoveries from employees for subsidised meals and employer-run canteens require separate analysis to determine whether such recoveries constitute consideration subject to service tax.