Canteen Service - Service Tax Exempted From 22-10-13

[SNEHAL SHAH]

CBEC exempts Services provided in relation to serving of food in canteen maintained by a Factory

The Central Government vides Notification No. 14/2013-ST dated October 22, 2013 (“the Notification”) has amended the Notification No. 25/2012dated June 20, 2012 (“the Mega Exemption Notification”).

The Notification adds Entry No. 19A in the Mega Exemption Notification which provides as under:

“Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year”

In accordance with the above, services provided in relation to serving of food or beverages by a canteen having the facility of air-conditioning or central air-heating at any time during the year maintained in a factory covered under the Factories Act, 1948 will be exempt from levy of service tax.

My Question :

As per Above ammended Notification - Service Tax exemted for Service Provided for out side canteen service provided in factory for employees ( Supply food & Services ) .

Please guide .

with Regards,

SNEHAL SHAH

[Brijesh Verma]

Factories which are covered under Factories Act and have canteen facility (whether Air conditioned or not) are now exempted.

[Brijesh Verma]

TO further clarify, earlier, only such restaurants, eating joints and mess were covered under tax which had air conditioning or central heating.

 

within this ambit even canteens (if air conditioned) within factory premises were covered.

This present exemption applies to these. 

There would be no difference if outside agency is involved or it is in house.

[SNEHAL SHAH]

R/sir,

But Canteen run outside Service provider not company run the canteen . Service proder issue bill and company pay the bill amount . In this case Service tax exemted from service provider ?

Please guide sir ,

SNEHAL SHAH

[Brijesh Verma]

YES DEFINITELY IT WOULD BE EXEMPT. THE EXEMPTION IS FOR ANY CANTEEN RUN IN A FACTORY. THE EXEMPTION NO WHERE TALKS ABOUT THE OWNERSHIP.

[Guest]

The wording of the notification is "canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948)". It means only those canteen which are to be mandatory to Employer to maintain under Factory Act. This mandatory condition is applicable only those factories having more 250 employee as per Factory Act. If factory having less the 250 employee and maintaing canteen for their employee is not covered under this notification.  Such canteen are maintained by employer not as per provision of Factory Act but as per employment terms/Agreement agreed by the employer with factory Staff/worker.

Therefore, please check whether canteen is maintained as per factory act or not?

My view - The mandatory (as per factory Act) canteen is maintained by factory canteen staff  or outside contractor is exempt from levy of service tax.   

C.N. Kate

 

 

[SNEHAL SHAH]

Many thanks sir for 100 percent Clarity about this notificaiton .

With Regards,

SNEHAL SHAH

 

[Guest]

I have some doubt which needs clarification:

1) Now specific exemption for canteen having Air-conditioning / central air heating has been given, does this mean that factory canteen not having Air-conditioning / central air heating was exempted so far ?

2) So what happens to the canteens not having Air-conditining / central air heating, were they exempted? This is because the service providers are charging service tax and the CENVAT after 01.04.2012 is being denied because it is for personal consumption.

[CA.S Ganesh]

Dear friends,

 

According to my view, the service tax is exempted for those who serving food to employees. Here, the person should be a factory. if outsider provides food, then it is covered under catering service, hence not exempted.

 

provider should be a factory. like many manufacturing cos.preparing food on own are exempted

[Guest]

Do you mean that Canteen services provided by a outside contractor to the employees in a factory is taxable ?

[Velmurugan Alagappan]

Yes, going by the definition, it would  come under the purview of service tax, being provided by an outside canteen service provider.

However, if the canteen service provider, serves from & within the premises of a factory, service tax would not be applicable, as per the amended definition

And it should be a mandated canteen facility as per the Factories Act, going by the literal meaning of the notification which refers to (63 of 1948)".

 

S.Sridharan

[Guest]

Do you mean if food is cooked inside the factory and served inside factory, then, service tax will not be applicable? where as if it is cooked outside and brought and services in factory, then, service tax will be applicable?

Whereas the recent notification exempts without any rider does not differentiate served from outside or within:

“Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year”

 

 

 

[Velmurugan Alagappan]

Hi, Mr. Ashok Joglekar

I would like to clarify as below

To be exempt, the canteen should be mandated as per the factories act

And the same may be maintained by the Co or outsourced to the canteen service provider

If the canteen is not a mandated one, then  such an exemption cannot be drawn from the reading of the notification

Hope it clarifies

S.Sridharan

 

 

 

[Guest]

Do you mean if food is cooked inside the factory and served inside the factory covered under Factories act by the service provider then it is exempted? and it is taxable if  cooked outside and served in factory canteen covered under factories act?

[Velmurugan Alagappan]

Hi,

The point would like to emphasize is

Is the canteen mandated under the factories act

If so, service tax is exempt otherwise not

Ignore whether the canteen is run by factory itself or by an outside service provider

thanks

 

 

[Guest]

Still my original doubts remain unanswered:

I have some doubt which needs clarification:

1) Now specific exemption for canteen having Air-conditioning / central air heating has been given, does this mean that factory canteen not having Air-conditioning / central air heating was exempted so far ?

2) So what happens to the canteens not having Air-conditining / central air heating, were they exempted? This is because the service providers are charging service tax and the CENVAT after 01.04.2012 is being denied because it is for personal consumption.

[SNEHAL SHAH]

R/all ,

Yes as per Mr.sridharan srinivasan say  is 100 percent correct as per my opinion .

With Regards,

SNEHAL SHAH

[Guest]

I read an article which says only the employers providing Canteen services to their employees in the factory having Air-conditioning / central air heating is covered under factory Act is exempted and it does not cover the outside service provider providing services to the employers.

It is to be noted that S.No. 19 or 19 A ofNotification No. 25/2012, cover only the services provided in relation to serving of food or beverages by a restaurant / by a canteen to the customers. The services provided by the contractors to the employers cannot be covered under these entries. In case of the canteens run by the employers, these are canteens / eating joint / mess / restaurant in the hands of the employers and they provide service to the employees. So the benefit of exemptions under S.Nos. 19 & 19 A ibid can be claimed by such canteens / eating joint / mess / restaurant, i.e the employers. When the contractors provide service to the employers, the contractor is distinct from the canteens / eating joint / mess / restaurant and they provide service to these canteens / eating joint / mess / restaurant, run by the employers.

Hence, the contractors would continue to be liable to pay service tax.

Services provided by the Contractors to the employers in connection with cooking, serving, etc.	Prior to 30.06.2012	Liable to service tax under outdoor catering service. Abatement 50 percent under Notification 1/2006 ST Dt. 01.03.2006.
	From 01.07.2012 to till date	Liable to service tax. Value of service 60 percent of total amount as per Rule 2 C of Service Tax (Determination of Value) Rules, 2006.

[CA.S Ganesh]

I agreed the answer given by Mr.chandrasekara kate.

AI Summary

Canteen service exemption: factory canteens with air conditioning serving employees may be exempt from service tax. The notification exempts services in relation to serving food or beverages by a canteen maintained in a factory that has air conditioning or central air heating at any time during the year. The exemption applies where the factory is covered by the Factories Act; practitioners disagree on whether the canteen must be mandated under that Act, but several responses state the exemption applies whether the canteen is operated in house or outsourced, subject to verifying whether the canteen is maintained pursuant to the Factories Act.