Service Tax on Canteen services

[Pradeep Jain]

Sir,

Entry no. 19A of Notification no. 25/2012 dated 20.06.12 inserted dated 20.06.12 vide notification no. 14/2013 dated 22.1013 envisages exemption to services provided in relation to the serving of food of beverages by a canteen maintained in a factory covered under Factories Act, 1948.

In this connection we are getting canteen services that is required as per Factories Act from the outdoor caterer for this purpose space for cooking of foods and a hall to service food to employees provided by the company .

In such case Canteen Service Tax provider is eligible to get the above exemption .

I would like to state that our Canteen service tax provider has taken service tax registration under the under Outdoor Caterer . And service tax department of their jurisdiction insisting to pay service tax thereon. Reason mentioned is that - he is providing catering service to the factories from his centralized kitchen and in some cases he is cooking the food in the factory premises itself. Hence the service contract is with the respective factories only as an Outdoor Caterer . In view of the same above said exemption is not applicable.

Kindly advise .

With best Regards

Pradeep Jain

[Madhukar N Hiregange]

The outdoor caterer should send a Speed post letter stating that the exemption in 19A is ONLY for the outdoor caterer as it is in relation to service of food and beverages.

Many companies who became aware of this change have stopped paying the outdoor caterer.

[Ravi Kumar Somani]

Dear Mr. Pradeep Jain,

In all essence exemption should be applicable to the outdoor caterer from service tax under entry 19A. However, still if your caterer decides to charge service tax for the service provided, it shall not add to your cost as you can pay and take CENVAT credit of the same. In very recent judgement of a Delhi Tribunal a stay was granted and CENVAT credit was allowed to be taken. Please find below the decision of the principal bench "TATA BLUESCOPE STEEL LTD.  2014 (34) S.T.R. 49 (Tri. - Del.)= 2014 (5) TMI 725 - CESTAT NEW DELHI

Stay/Dispensation of pre-deposit - OutdoorCatering service - For providing canteen facility to workers in factory - It is input service, on which assessee is eligible to take credit of Service Tax paid by them - Section 35F of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994 - Sections 65(76a) and 65(105)(zzt) of Finance Act, 1994. [para 5]

Further, Hon’ble Bombay High Court in the case of CCE,Nagpur v. Ultratech Cement (supra) = (2010 (10) TMI 13 - BOMBAY HIGH COURT has also held that the cenvat credit would be admissible.

[Rakesh Chitkara]

Are the Judgments cited by Mr. Ravi KantSomani pertain to demand-period pre or post negative list ?

AI Summary

Service tax exemption for canteen services: outdoor caterers can qualify and recipients may claim CENVAT credit when tax is charged. Exemption for canteen services in factories applies to outdoor caterers supplying food and beverage services as part of the factory canteen; if tax is charged, recipient companies can pay and claim CENVAT credit, with tribunal and high court precedents supporting credit and stay measures.