Wct applicability

This query is : Resolved

laukik (Querist)
Follow

18 June 2012 currently we are getting canteen facility from one of the canteen service provider. he is charging service tax and vat on bill amount. so pls. advice me is works contract tax provision applicable to him? if yes then by which rate?

Dayal

Dayal (Expert)
Follow

19 June 2012 Canteen service providers are under a composition scheme where they are required to charge a specific % of VAT.

In Maharashtra it is 5%.

Vat is applicable on the element of service tax as well.

Post 1st July it will be on net value.

laukik

laukik (Querist)
Follow

19 June 2012 Thanks.

currently he is charging vat at 12.5% on 50% of Invoice Value not on full value (Invoice Value + service tax).. is it right?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

03 August 2025 In the scenario you've described—where a canteen service provider is charging Service Tax and VAT on their invoices—the key question is whether Works Contract Tax (WCT) is applicable.
Here’s a clear breakdown based on pre-GST regime (since you're referring to 2012 context):

⚖️ 1. Is WCT Applicable to Canteen Services?
No, WCT (Works Contract Tax) is not typically applicable to pure canteen or catering services, because:
WCT applies to composite contracts involving transfer of property in goods (like construction contracts, fabrication, etc.).
Canteen services fall under restaurant/catering services, not “works contracts.”
However, VAT may still apply on the deemed sale of goods (i.e., food), and Service Tax applies on the service component of catering.
🍱 2. How is VAT and Service Tax Applied in Canteen Services (Pre-GST)?
Under the composite nature of catering:
VAT: Charged on the portion relating to food/material, typically on 40–70% of invoice (depends on state laws).
Service Tax: Applied on 40–60% of total invoice value (as per Service Tax Composition Scheme Rule 2C).
In Maharashtra, VAT was often charged at 12.5% on 50% of invoice value for canteen contracts — this matches what you're seeing, so yes, that was correct.
Also, VAT was not required to be charged on the service tax component, unless the state VAT law specifically required that (which was debatable and not common practice in most states).

🧾 3. So is the canteen vendor correct in charging 12.5% VAT on 50%?
✅ Yes — charging 12.5% VAT on 50% of invoice value (excluding service tax) was a common and accepted practice in many states like Maharashtra.
❌ WCT is not applicable, unless the vendor is supplying and installing kitchen equipment or undertaking infrastructure work — which doesn’t seem to be the case here.

✅ Summary:
Aspect Applicability
Works Contract Tax ❌ Not applicable
Service Tax ✅ Applicable (pre-GST)
VAT ✅ Applicable on food part
WCT Rate ❌ Not relevant here
VAT on Service Tax ❌ Not standard; avoidable
If you’re dealing with this post-GST, the rules are completely different, and canteen services attract 5% or 18% GST, depending on input credit eligibility.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now