Pradeep Jain - Chartered Accountant

Sir, we are availing canteen facility by a contractor (a partnership firm) in our facory premises. Canteen contractor is procuring all materials, making food and serving it to employees. After introduction of Reverse charge mechanism (RCM), we consider this service as a "Works Contract Service" and paid 50% service tax by service provider and 50% service receiver as per RCM. Contractor calculated 50% partial service tax after considering abatement and we, as a service recipeint, paid balance 50% service tax. We followed this practice for one year. Then in our service tax audit, auditor adviced us that this service is not coming under RCM and recommended that canteen contractor should pay 100% service tax. In this regards, my question is whether canteen contractor is defaulter for short payment service tax ? or can we produce proof of 50% service tax paid by service receiver ? Service tax dept has got 100% tax i.e. 50% from service provider and 50% by service receiver. Please guide. Service receiver is not availing service tax credit relating to canteen services.

Yes, the canteen contractor is defaulter for short payment of service tax. This is for the reason that the service provided by him falls under outdoor catering services wherein the liability to pay service tax is on the service provider and there is no partial reverse charge. The service tax department will not consider the service tax deposited by service receiver by mistake under the category of works contract service. The option available with the service receiver is to get refund of service tax wrongly paid by them under section 11B of the Central Excise Act, 1944. Furthermore, the service provider is legally required to pay service tax on the services provided by them irrespective of the fact that 50% service tax has been paid by the service receiver under another category of service by mistake. {Query replied by: - CA Neetu Sukhwani & Monika Tak}

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