Catering in trains – who is liable to pay Service Tax?
Recently we carried a judgement of the AP High Court that VAT cannot be collected from both the main contractor and sub contractor. We also carried a CESTAT order that Service Tax cannot be collected from the sub consultant. Board had recently given a clarification on a similar issue.
The Indian Railway Catering and Tourism Corporation Ltd asked the Board for a clarification and they stated that
++ In respect of catering services provided in Shatabdi / Rajdhani trains, IRCTC licensed private contractors (known as sub-licensee) provide catering services on board the trains and the private contractor pays service tax under outdoor catering service for the catering services provided.
++ The entire amount billed to IRCTC towards cost of food supplied to the passengers by the private contractor is transferred by Railways to IRCTC which in turns transfers it to the private contractor who is providing services.
++ IRCTC does not retain any amount and service tax is paid by the private contractor on the total amount billed by him to IRCTC.
++ IRCTC recovers 15% of the billed amount from the private contractor and pays service tax on the said amount under Business Auxiliary Service.
Board clarifies -
++ IRCTC has been formed to manage the catering and hospitality services in trains and licensed to provide and distribute meals and services to the passengers on board the trains.
++ Outdoor caterer is defined under section 65(76a) as a caterer engaged in providing services in connection with catering at a place other than his own and caterer is defined under section 65(24) as any person who supplies, either directly or indirectly, any food or beverages.
++ In view of the definition of outdoor catering service under section 65(105) (zzt), outdoor caterer under section 65(76a) and caterer under section 65(24) and the facts stated, the service provided by IRCTC appears to be classifiable under outdoor catering service.
++ If any further clarification on the matter is required, the jurisdictional officers may be contacted.
As if jurisdictional officers can clarify what even the Board could not! Now 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. Board does not clarify this. We will bring you more analysis on this issue soon.
F. No. 332/38/2006-TRU dated the 1st August, 2006.