Notification No 24/2012 dated 06.06.2012 introduced new Rule 2C in Service Tax (Determination of Value) Rules, 2006 for determination of the value of service portion in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering.
As per this rule, the value of the service portion shall be determined in following manner;
|Value of service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner
||Shall be the following per cent of the TOTAL AMOUNT charged:
|In a restaurant
|As part of outdoor catering
The term “total amount” means the fair market value of all goods and services supplied in or in relation to the supply of food or any other article of human consumption or any drink (whether or not intoxicating), whether or not supplied under the same contract or any other contract, after deducting the amount charged for such goods or services and the value added tax and sales tax levied thereon. The fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles
Whether CENVAT Credit will be available?
The provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986)
Hence, CENVAT CREDIT of following shall be available;
1. Input Services
2. Capital Goods
3. Inputs classifiable other than under Chapters 1 to 12 of the Central Excise Tariff Act, 1985.
Whether there are any restrictions on availment of CENVAT CREDIT?
1. Any goods meant for human consumption classifiable under chapters 1 – 22 of Central Excise Tariff are not ‘inputs’ for provision of such service and therefore, CENVAT Credit not available on these items.
2. CENVAT Credit of other inputs, input services and capital goods will be available subject to the provisions of the Cenvat Credit Rules, 2004;
The sale of food in the restaurant would amount to clearance of exempt goods and thus the provisions of Rule 6 of Cenvat Credit Rules, 2004 will be applicable.
Would Rule 2C of the Valuation Rules also apply to determination of value of service portion in cases of supply of food or any other article of human consumption or any drink, in a premises, including hotel, convention center, club, pandal, shamiana or any place specially arranged for organizing a function?
No. Rule 2C applies only in cases of restaurants and outdoor catering.
For valuation of service portion where such supplies are made in any other premises like hotel, convention center, club, pandal, shamiana or any place specially arranged for organizing a function an abatement of 30% has been provided for in exemption Notification No. 26/2012-ST dated 20.06.2012.