Chargiability of service tax, Service Tax

[CA. OM PRAKASH]

my client is providng outdoor catering service. he has been availing 50% abatement under notf. no.1/2006. Now receipient of service willing to change the contract/agreement bifurcating the cost of food/meal say Rs. 45 and service element say Rs. 5/- per meal/food/lunch. In that case, we have to charge service tax only on Rs.5 @12.36%. Heitherto we had to charge 50% of gross ( Rs.50/-)=25*12.36%. Is the agreement valid ? and can he do so?

Posts / Replies

[V Ramanujam]

In my view, to claim abatement under notn 1/06, total value including charges for food should be taken into account. In case break-up can made between sale of food and service portions and separate bill for food is raised, then sale value of food items can be claimed as exempt under Notn 12/2003 and service tax is to be paid on the entire service portion without any abatement and with the benefit of CENVAT credit of input/input services.

[Madhukar N Hiregange]

Yes under notifcation 12/2003 the deductionis available for the valuie of goods sold. Is the VAT being paid onthe food portion. If so then there cannot be any issue.