Service tax & vat liability on canteen services

This query is : Resolved

SATYENDRA KR. GUPTA (Querist)
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15 April 2015 Dear Professional Colleagues,

A new canteen contractor is a sole proprietorship firm starting taking contracts in the F.Y.2015-2016 of canteen in an educational institutions in Ghaziabad, Uttarpradesh for providing meal to hostel boys & girls and for this educational institution directly pay for this service .

An additional sale counter has been open by canteen contractor in the institute premises to sell of sandwich, burger, cold drink, tea & coffee etc.These services are self service by the students and the staffs of the institute.
On the basis of above aforesaid two queries, kindly confirm registration required under which act like service tax, vat etc. & what will be the rate applicable of service tax & vat (if applicable) on canteen contractor.

Please, also confirm under which head of service is to be required registered under service tax vat.
Thanks & Regards.
Satyendra Kumar Gupta

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 April 2015 Service tax not applicable for catering service to educational institution.
VAT may be applicable for the sale counter.

SATYENDRA KR. GUPTA

SATYENDRA KR. GUPTA (Querist)
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16 April 2015 Dear Sir,

Please also confirm is vat liability applicable for catering services to educational institution ?

And also confirm is service tax liability on sales counter at educational institute ? if yes then what is the rate of service tax ?

Thanks & Reagards
Satyendra Kumar Gupta

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 Hey! Here’s a detailed take on the canteen services and related taxes:

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### 1. **Service Tax on Canteen Contract to Educational Institution**

* **Catering service to educational institutions** is **exempt from service tax** under the notification for educational institutions (like Notification No. 25/2012-ST, as amended).
* So, the **canteen contractor providing meals to hostel boys/girls** in an educational institution **does NOT need to pay service tax** on this service.

---

### 2. **VAT on Canteen Services**

* **VAT** is generally levied on sale of goods, not services.
* If the canteen contractor is providing **meals directly to the educational institution** (i.e., they are billing the institution), then **no VAT on catering service** because it’s a service exempt from service tax and no sale of goods to customers directly.
* However, if the **canteen contractor is selling items (like sandwiches, burgers, tea, coffee, cold drinks) at a separate counter directly to students and staff**, this is a **sale of goods** and **VAT is applicable** on these sales.

---

### 3. **Service Tax on Sale Counter**

* Sale of goods (sandwich, tea, coffee, cold drinks, etc.) **is not a service**, so **no service tax on sale of these items**.
* The canteen contractor must charge **VAT on the sale of these goods** as per the applicable VAT rates (usually 5%-14.5%, depending on the product and state VAT laws; for UP it varies).

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### 4. **Registration Requirements**

* The canteen contractor should be registered for **Service Tax only if other taxable services are provided** (not in this case, for catering to educational institution).
* **VAT registration is mandatory** if the turnover from sale of goods crosses the threshold limit as per UP VAT laws.

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### **Summary:**

| Service/Activity | Service Tax Applicability | VAT Applicability |
| ----------------------------------------------------------------- | ------------------------------ | ------------------ |
| Canteen service to educational institution (meals) | **Exempt from service tax** | No VAT on service |
| Sale of food/beverages at sale counter (direct to students/staff) | Not applicable (sale of goods) | **VAT applicable** |

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If you want, I can help draft a clear note or checklist for the canteen contractor! Would you like that?

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