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Service tax applicabiity on various types of catering

yashsr (CA) (2285 Points)

02 July 2013

Hello,

Please let me know the Service Tax applicability in the following cases:

Catering Services : We cook food at our central kitchen in thane and transport and serve the food across Mumbai

Cafeteria Management Service : Food getting prepared in central kitchen in thane and served in office canteen in Andheri .

Wedding Catering – Food getting cooked and served at the venue .

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6 Replies

CA Harshal Pahade (Professional) (79 Points)
Replied 06 July 2013

Service Tax is applicable on all of the above servises.

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satya (Executive Excise) (1839 Points)
Replied 06 July 2013

The meaning of Outdoor Catering has been changed after 01-JULY-2012;

(a) There is no service tax on food supplied in canteens as it is ‘eating joint’ without AC and bar. However, Vat should apply, if State law so provides.

(b) If food is served by hotel in banquet or other halls, service tax should not be payable on value of food, if charges for hall and other services are levied separately. Vat will be payable on value of food.

(c) If the expenses are for personal use or consumption of employee, Cenvat credit will not be available to service receiver.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 07 July 2013

In the recent Kerala HC it was decided that there is no liability on supply of goods under ST due to article 366(29A) which states that services +goods are sales.

Need not pay from now onwards is an option.

yashsr (CA) (2285 Points)
Replied 09 July 2013

A Service Tax Expert replied to our query:

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Service tax applicability

The term ‘outdoor catering’ has not been defined in valuation rules or anywhere else. The earlier definition of ‘outdoor catering’ is not effective from 1-7-2012.Hence, the term ‘outdoor catering’ has to be understood in common parlance test.

As per Oxford Reference Dictionary, ‘cater’ means ‘provide food and drink at (a social event)’.

The ‘outdoor catering’ means the service provider goes at a place where a function is held which is not place of business of the caterer.

Thus to the best of our knowledge your services will be termed as outdoor catering services

Further Rule 2C of The Service Tax ( Determination of Value) Rules 2006, ie; Determination of value of service portion involved in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering reads as under:

Subject to the provisions of section 67, the value of 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 at a restaurant or as outdoor catering, shall be the specified percentage of the total amount charged for such supply, in terms of the following Table, namely:-
Table
Sl. Descripttion Percentage of
No. total amount
1 2 3
1. Service portion in an activity wherein goods, being food or any other article of 40
human consumption or any drink(whether or not intoxicating) is supplied in any
manner as a part of the activity, at a restaurant
2. Service portion in outdoor catering wherein goods, being food or any other 60
article of human consumption or any drink(whether or not intoxicating) is
supplied in any manner as a part of such outdoor catering

Explanation 1.- For the purposes of this rule, "total amount" means the sum total of the gross amount charged and the fair market value of all goods and services supplied in or in relation to the supply of food or any other article of human consumption or any drink(whether or not intoxicating), whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services, if any; and

(ii) the value added tax or sales tax, if any, levied thereon:

Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally
accepted accounting principles.

Explanation 2.- For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986).”

Thus in our best of knowledge and as per the above stated rules Service tax will be applicable @ 12.36% on 60% of total amount

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Please let me know if the above is correct.