Service tax for serving of good or beverages by a canteen maintained by a factory, Service Tax

[NAUSHERAWAN SM]

Dear Sir,

Let me know whether service tax is payable by the outdoor caterer supply and serving food directly to the employees in the factory canteen maintained by the factory.

Service Tax exemption Notification No. 14/2013-ST dated 22.10.2013 after entry inserted namely “19A” is exempted from payment of Service Tax for serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948). The outdoor caterer supplying and serving food directly to the employees in the factory canteen maintained by the factory and charges cost of food and services on contractual basis. Whether Service Tax is liable to pay by the outdoor caterer. The Central Excise & Service Tax deptt. is asking to pay service tax to outdoor caterer for the above.

Regards,

S.M.Nausherawan

Sr.Manager (Indirect Taxes)

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

With effect from 1.7.2012 no service tax is payable on food supplied in a canteen if it is without the facility of air conditioning or central heading whether such canteen is located in a factory or office. The position will be the same if the canteen is run by outside contractor, then it will be called 'eating joint' and not outdoor catering.

With effect from 22.10.2013 no service tax is payable on foods supplied in a canteen, even if it has air conditioning facility , if the canteen is maintained under Factories Act (that is, in a factory employing 250 workers or more). the position will be same if the canteen is run by outside contractor.

[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 are 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.

[KASTURI SETHI]

Both experts have enriched my knowledge especially the condition of 'more than 250 employees in a factory. Thanks a lot to Sh.Mahir S. and Sh.Rajagopalan Ranganathan, Sirs.