ST on Canteen service to Factory

[Guest]

Category - Out door Catering

Date of ST 2 - 09.1.13

Nature of Business - Client Providing services of Outdoor catering to Factories registered under Factories Act.Form 01.04.2014 Client started business.

Department Notice -

consequently if a factory enters into a contract with a outdoor caterer to provide services in relation to servicing of food or beverages to a canteen having the facility of air-conditioning

Or central air heating , then in such case the benefit of the exemption under Notification 14/2013 ST will not apply to such outdoor caterers providing the services to a canteen.

Query - Whether service tax applicable on such transaction.

[MUKUND THAKKAR]

Sir,

As per my view any service providing employer to employee service tax is not applicable in your case.

[Mahir S]

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

AI Summary

Service tax exemption for factory canteens may not apply to outsourced catering where the canteen has air conditioning. Applicability of service tax to outdoor catering for a factory canteen turns on whether the canteen qualifies for the statutory exemption: the department indicates canteens with air conditioning or central heating served by outsourced caterers may lose exemption. Practitioners differ: one treats the supply as an employer to employee service (no service tax), the other limits the exemption to statutorily mandated canteens at establishments meeting the employee threshold, excluding voluntarily maintained canteens.