Levy of service tax on outdoor caterers in railway trains - Regarding - Service Tax - 332/38/2006-TRU

Letter No. 332/38/2006-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs New Delhi, dated 1-8-2006 Subject : Levy of service tax on outdoor caterers in railway trains - Regarding. Please refer your letter dated 8-6-2006 and subsequent discussion seeking the legal position regarding levy of service tax on the catering services provided on board the railway trains so as to follow uniform practice. 2. It has been stated that, - <!--[if !supportLists]--> <!--[endif]-->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 classifiable under Section 65(105)(zzt) of the Finance Act, 1994 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. Hence, IRCTC is not, required to pay service tax on this amount again, in view of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 . <!--[if !supportLists]--> <!--[endif]-->IRCTC recovers 15% of the billed amount from the private contractor and pays service tax on the said amount under Business Auxiliary Service. 3. The matter has been examined. It has been stated that the service tax is paid by, - <!--[if !supportLists]--> <!--[endif]-->The private contractor (sub-licensee) for the entire amount billed under outdoor catering service, and <!--[if !supportLists]--> <!--[endif]-->IRCTC on 15% of the billed amount recovered from the sub-licensee. 4. In respect of classification of services provided by IRCTC it is observed that : <!--[if !supportLists]--> <!--[endif]-->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. <!--[if !supportLists]--> <!--[endif]-->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. 5. 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. 6. As regards applicability of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 , any expenditure incurred by the service provider on behalf of his client as a pure agent does not form part of the taxable value subject to fulfilment of the conditions specified in the said rule. 7. If any further clarification on the matter is required, the jurisdictional officers may be contacted.