CENVAT Credit on Factory Canteen Expenses

[Pradeep Jain]

Dear Sir,

 

Our company is a Limited company and  having canteen facilities for Employees . The Contract  for this is given for Canteen service  such as Lunch, Dinner and Tea and Snacks .

My Query is that :-

- Are we entitled to avail CENVAT Credit on the service tax paid thereon?

- If yes then , do we need to reverse the CENVAT Credit on the amount recovered from Employees ?

 

Regards

 

Pradeep Jain

[YAGAY andSUN]

CENVAT credit on Canteen Services will not available to you since there had been amendment in the definition of the Input Services w.e.f. 01-04-2011 vide notification no. 3/2011-CE (N.T) dated 01-03-2011.

[JAMES PG]

If you are recovering Canteen expenses from the emplyees, then Service Tax also needs to be paid by the Co

[YAGAY andSUN]

Dear Sir,

On what basis, employer is liable to pay service tax on amount which is being recovered from employees for providing them the subsidised food etc.

Please guide us in this regard.  If there is any circular or on basis of mega exemption notification or on the basis of negative list , it is required to pay, then, please share your knowledge with us.

Exibit:-

 Say, if the employer had incurred Rs. 100/- on the canteen expenses and a Rs. 12.36 is the service tax amount. If the employer recovers Rs. 20/- from the employee, then, naturally, the net expenses,would be Rs. 80/- in the Canteen Expenses Account.  In this whole transaction, the service tax paid on Rs. 100/- will remain constant.  Rs. 20/- will not be treated as Non Operating Income. Now, the question is, whether on Rs. 20/- service tax would be applicable or not.

Please revert.

Best Regards,

Pradeep Khatri

[JAMES PG]

 As per Section 66 E (i) of the Act, the following is a declared a service.

“service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity”.

As per the MOF presentation on Service Tax, the following clarification is given:

Employer to employee.. Not excluded and thus taxable

Expenses recovered from employees for private use of company facilities: taxable unless otherwise exempt; can take Cenvat credit if employee registered

 

 ―Canteen charges (usually exempt unless AC and alcoholic liquor being served)

―To and fro transportation will be taxable;

―Stay in guest house Rs 1000 per day or more taxable

―Charges for private use of official car: taxable unless "right to use"

―Training: taxable

―Recovery of pay for breach of contract: taxable

In view of the above , canteen recovery from employee appears to be taxable and is exempted only when the canteen premises is not having the facility of airconditioining or central air heating in any part, at any time during the year.

Seeks your valuable opinion on this  

[JAMES PG]

As per the mega exemption Notn, exemption is not available when AC as well as licence to serve liquor in a canteen is there.

19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a  mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;

Both the conditions are to be satisfied for levy. My understanding was not correct and regret for the misleading comments put in the forum

[YAGAY andSUN]

Dear Sir,

Thanks for your kind reply.  This forum need your comments, inputs on regular basis.  Please do keep writing and sharing your knowledge with us.

Seeking your involvement on this very good platform.

Best Regards

Pradeep Khatri

[NANDKUMAR SAGWEKAR]

You are not required to pay ST on amount recovered if your canteen in not centralised AC or heating and does not have licence to serve the liquor.Further you are not eligible to take cenvat credit on services availed at canteen because it is for the personal use of employee w.e.f. 01.04.2011.

 

 

Thanks

 

A M SHEMBEKAR

CELL 9421187122

AI Summary

CENVAT credit denial for employee canteen services; recoveries taxable unless canteen lacks AC and liquor licence. CENVAT credit is not available for employer-provided canteen services used for employees' personal consumption due to the amended Input Services definition. Recoveries from employees for subsidised food may be taxable as the service portion of food supply, unless the canteen both lacks air conditioning/central heating throughout the year and does not hold a licence to serve alcoholic beverages; if taxable, the employer must discharge service tax and cannot take CENVAT credit for such services.