Food in Trains - who should pay Service Tax?
THE Railways provide food in certain trains like Rajdhani Express. This contract is given to Indian Railway Catering and Tourism Corporation Ltd (IRCTC). The IRCTC in turn gives the contract to sub contractors who are caterers who actually supply the food. The payment is made to the caterer through IRCTC by the Railways. It is like this.
The caterer billed the IRCTC for the food supplied to passengers. IRCTC gave it to Railways. Railways paid the entire amount to IRCTC. IRCTC paid the entire amount to the caterer, who paid Service tax. IRCTC gets a commission of 15 Percent on which it paid Service Tax under BAS. IRCTC asked the CBEC for a clarification whether it was right and the Board replied that both IRCTC and the caterer are providing outdoor catering service.
While reporting this in DDT 494 - 20.11.2006, I mentioned the L&T judgement of the High Court - "as per the Board clarification, IRCTC is required to pay Service Tax for the catering in the trains, even though it does not actually provide even a glass of water. Then is the contractor who actually supplies the food also required to pay Service Tax? That too for the same taxable event?. Please recall the AP High Court judgement in L&T."