service tax for canteen supply

[Ramakrishnan Seshadri]

Dear Sir,

We are are having 3 units manufacturing automobile parts.

For the workers and staff we have engaged a catering supply company for supplying food to our workers and staff.

The canteen suppliers will prepare food at his place and bring to our factory and serve the food.

As per

'Entry No. 19Aof Exemption Notification No. 25/2012-ST dated 20.06.2012, Air Conditioned or Air-heated Canteen maintained in a Factory are exempt from Service Tax w.e.f. 22.10.2013'

Now our question is whether service tax has to be charged for supply of food.

Give us opinion that service tax will be applicable or not. If not means shall we claim refund for the same for the service tax paid during the epriod November to till date.

Regards

S.Ramakrishnan..

[YAGAY andSUN]

Dear S. Ramakrishan,

We are sharing with you an article written by Mr. Dr. Sanjiv Agarwal on the afore said  query. In our opinion you may seek refund under Section 11B of the Central Excise Act, 1944 as made applicable to service tax laws vide Section 83 of the Finance Act, 1994.

EXEMPTION TO FACTORY CANTEENS

An article by Dr. Sanjeev Agarwal

Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948, having the facility of air-conditioning or central air-heating at any time during the year are exempt from Service Tax w.e.f. 22.10.2013 vide Notification No. 14/2013-ST dated 22.10.2013 under Entry No. 19A of exemption Notification No. 25/2012-ST dated 20.06.2012. The meaning of the word “factory” is same as defined in Factory Act, 1948.

According to section 2(m) of the Factories Act, 1948, 'factory' means any premises including the precincts thereof –

1. Where ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or
2. Where twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on.

The term “Manufacturing Process” is defined in Section 2(k) of the Factories Act, 1948 and accordingly, “Manufacturing Process” means any process for-

1. Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use sale, transport, delivery or  disposal, or
2. Pumping oil, water, sewage or any other substance; or
3. Generating, transforming or transmitting power; or
4. Compositing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding;
5. Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;
6. Preserving or storing any article in cold storage;

It may be noted that canteen is a statutory requirement under the provisions of section 46 of the Factories Act, 1948 where the factory is employing more than 250 employees.

Therefore, any factory canteen which is air-conditioned or air-heated provides services in relation to serving of food or beverages are out of service tax net w.e.f. 22.10.2013.

On combined reading of entry 19 and 19A of the exemption notification, it can be said that it has been the intention of the government to grant exemption from Service Tax in relation to services provided for serving of food and / or beverages by a canteen maintained in a factory which is covered under or governed to the Factories Act, 1948, whether or not having the facility of air conditioning or air heating at any point of time in a year. While entry 19 uses the word eating joint (which is much wider in scope), entry 19A is specific to canteen only. The services provided by a canteen maintained in a factory, whether air conditioned or not, would be exempt under entry 19A.

The facility of air –conditioning or air-heating if available in the part of the year, even then such exemption is available to such factory canteen. Such exemption is not applicable to the canteen run in an office or any other place.

Hope that it would suffice your query.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Ramakrishnan Seshadri]

DEar Sir,

Thanks for your reply. I need some more clarification.

As you said we can claim refund.thanks

But my question is that as per this notification the outdoor catering service provider who supplies food exempts from paying service tax.

But some people say this notification applicable only for restaurants.

We cannot claim refund they are saying

Please clarify

Thanks & Regards

S.Ramakrishnan.

[Rajagopalan Ranganathan]

Sir,

                Entry 19 of Notification No. 25/2012-Service Tax dated 20.06.2012 exempts services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year.

                Entry 19 A as inserted by Notification No. 14/2013-Service Tax dated 22.10.2013 exempts 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.  The term canteen can be construed to be included in the term eating joint.  Therefore your are eligible for the exemption and you can claim the refund of service tax paid, if any by you.  Entry 19 A talks about canteen only.  

[Priyesh Agrawal]

Dear sir,

The exemption under entry 19A of Notification 26/2012 dated 20/06/2012 is read as -

"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"

These canteen is to be maintained in factory be person responsible of factory or to say factory head.

In case of your client there are two separate and distinct activities are involved -

(a) Factory head is Supplying food to workers from canteen maintained at factory (assuming covered under Factories Act) would be exempt from Service tax vide aforementioned entry.

(b) in order to provide the canteen service he is availing services of outdoor caterer and outdoor caterer shall charge service tax on his bill.

AI Summary

Debate on Service Tax Exemption for External Catering in Factories Under Notification No. 25/2012-ST Sparks Refund Questions A company manufacturing automobile parts inquires about the applicability of service tax on food supplied by an external catering company to its factory workers. The query references an exemption for air-conditioned or air-heated factory canteens under Notification No. 25/2012-ST. Responses suggest that factory canteens, whether air-conditioned or not, are exempt from service tax, allowing for potential refunds of taxes paid. However, there is debate on whether this exemption applies to external catering services, with some asserting it is limited to restaurants, complicating the refund eligibility.