This article is a short description about the taxability of the services provided by Industrial canteens maintained in a factory under the Factories Act,1948.
It is to be analysed on the basis of :-
1. the Mega Exemption Notification No.25/2012 – ST dated 20.06.2012 and
2. the Amended Notification No. 14/2013-ST dated 22/10/2013.
Under the Exempt Services Notification No. 25/2012,the Central Government exempted 39 taxable services from the whole of the Service Tax leviable thereon under Section 66B of the Finance Act,1994. These 39 services are actually taxable under various heads ,but by satisfying the necessity in the public interest, the Central Government exempts these services from charging service tax.
Item no.19 in the Notification No. 25/2012 reads as follows :-
“ services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess,other than those having ( i ) the facility of air-conditioning or central air heating in any part of the establishment, at any time during the year,and (ii) a licence to serve alcoholic beverages. “
Item no.19A ,inserted by the Notification No. 14/2013 dt.22/10/2013, reads as follows;-
“ 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.”
On an analysis of the taxability of industrial canteens , on the basis of the above referred Notification No. 25/2012 and Notification No. 14/2013-ST sl.nos. 19 and 19A, respectively, it is undoubtedly clear that Industrial Canteens are exempted from service tax. More clearly , I am providing my own opinion on the above , as follows :-
1. Industrial canteens covered under the Factories Act,1948 , not having the facility of air conditioning or central air heating or a licence to serve alchoholic beverages , are exempted from service tax with effect from 01-07-2012 as per Notification No.25/2012,dt. 20.06.2012,item no.19., because industrial canteen can be surely said te be an eating joint or a mess.
2. Industrial Canteens covered under the Factories Act,1948, having the facility of air- conditioning or central air heating are exempted from service tax with effect from 22.10.2013 as per Notification No. 14/2013-ST , dt. 22.10.2013 , item no.19A.
3. Out of the terms restaurant, eating joint, or mess , given in the Notification No. 25/2012 dt.20.06.2012, only Industrial canteens, covered under the Factories Act,1948 , having the facility of air- conditioning or central air- heating are exempted from service tax by the Notification No. 14/2013-ST , dt.22.10.2013, by the Central Government.
Note ;- Restaurant, eating joint or mess includes , among others , industrial canteens ,covered under the Factories Act,1948, also.
4. Restaurant , eating joint or mess , other than ,industrial canteens , covered under the Factories Act,1948, having the facility of air-conditioning or central air-heating, are not exempted from service tax by the Notification No. 14/2013-ST, and hence , restaurant , eating joint or mess , other than Industrial Canteens, having the facility of air-conditioning or central air- Heating are liable to pay service tax.
5. Restaurant, eating joint, or mess including Industrial Canteens, covered under the Factories Act,1948, having , a licence to serve alchoholic beverages , as per Notification No. 25/2012 dt.20.06.2012, are also not exempted from service tax and hence these categories are liable to pay service tax.
The above 5 explanations are the personal view and clarification of the author on the basis of a detailed and indepth analysis of the Notification No. 25/2012 and Notification No. 14/2013-ST , and on the basis of the inherent intuition and learned and trained experience of the author in dealing with diverse service tax matters .
Further clarification from judicial pronouncements or departmental clarifications are needed for any further action, or we have to challenge the same before the appropriate courts.
Explanation regarding Canteens covered under the Factories Act,1948.
Section 46 of the Factories Act,1948, deals with provision of canteen facility in factories.
Excerpts from Factories Act,1948 :-
Section 46 – Canteens.
(1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed , a canteen or canteens shall be provided and maintained by the occupier for the use of the workers.
(2) Without prejudice to the generality of the foregoing power, such rules may provide for –
(a) the date by which such canteen shall be provided
(b) the standards in respect of construction,accommodation,furniture,and other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which may be made therefor;
(d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen;
1*( dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer;)
(e) the delegation to the chief inspector,subject to such conditions as may be prescribed,of the power to make rules under clause ( c ).
The Factories Act,1948, indicates that a factory having more than 250 workers, shall, provide and maintain a canteen for giving subsidized food to the workers. For the proper functioning of the canteen, a managing committee shall be constituted and proper representation of the workers in the managing committee shall be ensured.
A factory can provide and maintain canteen in any of the following ways :-
1. canteen can be run by the factory, directly, by forming a managing committee, which include representation of workers also.
2. canteen can be run by a canteen co-operative society, formed for the purpose of providing subsidized food to the employees, by forming a managing committee by the elected representatives of the workers.
3. The organization can engage canteen contractors for providing canteen facilities and giving subsidized food to the employees.
All the above cases are treated as Canteens covered under the Factories Act,1948 , and hence are not liable for service tax, since 01.07.2012, as per Notification No. 25/2012,if no air-conditioned facilities are provided. And if they have air-conditioned facilities , they are not liable for service tax, with effect from 22.10.2013, as per Notification No. 14/2013-ST .
In contrary to the above , if any canteen covered under the Factories Act,1948 , not having the facility of air conditioning or central air heating or a licence to serve alchoholic beverages , are paying service tax for their services as outdoor catering service , then for the service tax paid up to 30.06.2012, the service receiving companies can claim cenvat credit on them, on the basis that these are part of their Cost of Production as per CAS-4.
From 01.07.2012, they are exempted from service tax as per Notification No. 25/2012, sl.no.19 , Therfore, for the service tax paid from 01.07.2012 , till date , the service provider can claim refund of the same , on the basis of the provision of Section 11B of the Central Excise Act,which is applicable in case of service tax also. The provisions of Section 11B of the Central Excise Act, will come in handy for persons liable to pay service tax to claim refund of service tax actually paid by them in different situations like –
(i). Service tax erroneously paid when there was no liability to pay any service tax,
(ii). service tax paid on an erroneous demand from the department, or
(iii). Service tax paid in excess of the amount that is legally payable, and similar situations.
The procedure laid down in Section 11B of the Central Excise Act, can be summerised as follows, insofar as refund of service tax is concerned :-
1. the person claiming refund must make an application for such refund.
2. the application must be made to the adjudicating authority designated for this purpose.
3. the application must be made before the expiry of one year from the ‘ relevant date’
4. the ‘relevant date’ for this purpose will be the date on which the service tax in respect of which the refund is claimed was initially paid for.
5. the application must be in the prescribed form and must be accompanied by the prescribed documents,which establish that the service tax was paid by the applicant and that the incidence of such tax had not been passed on by the applicant to any other person .
6. if the adjudicating authority is satisfied that the whole or any part of the service tax paid by the applicant is refundable, he may pass an order to that effect, and if the adjudicating authority is further satisfied that the incidence of tax has not been passed on by the applicant to any other person , he may order that the amount of refund shall be paid to the applicant.
(Author A.V.RAGHU. is Assistant Officer ( F&A ),Service Tax with Telk Ltd. and can be reached at avraghu.velayudhan4@gmail.com)
Since the Industrial canteens are exempted for paying service tax as said above. Please clarify me the same extended in GST also or else.
As per the Notification no.14/2013,
“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.”.
Analysis of the above notification, it appears that the exemption is available to:
Serving of food or beverages by a Canteen and not to a Canteen
Maintained in a factory covered under the Factories Act, 1948,
Having the facility of air-conditioning or central air-heating at any time during the year.
From the language used in the notification it can be interpreted that the exemption is available in cases where the services are provided by canteen to staff/ employees of the factory and charges are recovered from staff/ employees (similar to restaurant) and the exemption is not available when Outdoor Caterer provides services to a canteen.