Service tax applicability on food served by companies in canteen

Services provided by canteens not having air-conditioning or central air-heating at any time during the year, are already exempt under Entry 19 of the Notification No. 25/2012-ST. Now, services provided by canteens having air-conditioning or central air-heating at any time during the year are also exempted, if the canteen is maintained as per the Factories Act, 1948; if the said canteen is not maintained as per the Factories Act, 1948, then, the service would not be exempted and would be liable to service tax. download (4)

Service tax applicability on food served by companies in canteen, thus, in nutshell if you have a canteen in your office, which is basically to serve the office, and the same is not registered under the factories Act, 1948, then you have collect service tax from your employees and pay off to the government. We assume, in today’s world of centralized air-conditioning , there wont be any canteen without  AC.

To Conclude – This circular is again an additional burden for small and medium scale businesses, these canteens are solely for the objectivity of motivating employees by providing good quality food at reasonable cost.  We think that service tax provision and the desperateness to collect more taxes is stretching too far. 

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The full circular is reproduced as below:

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994, (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.25/2012-Service Tax, dated the 20th June, 2012, namely:—

In the said notification, in the opening paragraph, after entry 19, the following entry shall be inserted, namely:—

“19A. Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.”