Chargiability of service tax

[OM PRAKASH]

my client is providng outdoor catering service. he has been availing 50% abatement under notf. no.1/2006. Now receipient of service willing to change the contract/agreement bifurcating the cost of food/meal say Rs. 45 and service element say Rs. 5/- per meal/food/lunch. In that case, we have to charge service tax only on Rs.5 @12.36%. Heitherto we had to charge 50% of gross ( Rs.50/-)=25*12.36%. Is the agreement valid ? and can he do so?

[Guest]

In my view, to claim abatement under notn 1/06, total value including charges for food should be taken into account. In case break-up can made between sale of food and service portions and separate bill for food is raised, then sale value of food items can be claimed as exempt under Notn 12/2003 and service tax is to be paid on the entire service portion without any abatement and with the benefit of CENVAT credit of input/input services.

[Madhukar N Hiregange]

Yes under notifcation 12/2003 the deductionis available for the valuie of goods sold. Is the VAT being paid onthe food portion. If so then there cannot be any issue.

AI Summary

Service tax valuation: segregated billing for food may exclude sale value from service tax while taxing the service portion. If the supplier issues a distinct bill segregating the sale of food items, the sale value of goods may be treated under Notification 12/2003 as not liable to service tax, while the remaining service portion is taxable without the benefit of the abatement and the supplier may avail CENVAT credit for inputs and input services attributable to the taxable service portion.