Query – We have obtained contract from a company for running two canteens. We prepare food and serve to employees of company. The company has one AC canteen which is under Factories Act as company employs more than 250 employees. Company has another non AC canteen in another unit, where employees are less than 250 and is not under Factories Act.
The company is of the view that service tax is not chargeable by us to them in both the cases. However, department is taking a view that our services are 'outdoor catering services' and we are liable to pay service tax on 60% of value.
Answer - Section 66E(i) of Finance Act, 1994 defines following as 'declared 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.Exemption to services provided in restaurants without air conditioning or central heating - Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, are exempt from service tax - Sr No.19 of Notification No. 25/2012-ST dated 20-6-2012 w.e.f. 1-7-2012 as amended w.e.f. 1-4-2013.
Canteen is an 'eating joint' or a 'mess'.
Note that service provided by an eating joint or a mess are exempt from service tax. Who is running or managing that eating joint or mess is not relevant for purpose of this exemption.
Exemption to food and beverages served in canteen in factory - Services provided in relation to serving of food or beverages by a canteen maintained in factory covered under Factories Act having facility of air-conditioning or central air heating at any time during the year is exempt from service tax w.e.f. 22-10-2013 – Sr No. 19A of Notification No. 25/2012-ST dated 20-6-2012 inserted w.e.f. 22-10-2013.
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