No Service tax on
free Pickup/Home delivery of food, being ‘Sale’ in nature –
Chandigarh Commissionerate
Background:
The Government vide Entry No. 19 of
the Mega Exemption Notification No.25/2012-ST dated June 20, 2012 (“the
Mega Exemption Notification”) granted exemption from payment of Service tax
to Restaurants, eating joint or a mess providing service in relation to food or
beverages, other than those having:
Facility
of air-conditioning or central air-heating in any part of the establishment, at
any time during the year, and
- License to serve alcoholic beverages.
Thus all AC Restaurants having
license to serve liquor were exigible to Service tax.
Subsequently w.e.f April 1, 2013,
Entry No. 19 of the Mega Exemption Notification was amended by Notification No. 3/2013-ST dated March 1, 2013
which deleted the point (ii) thereof. Accordingly, after such amendment,
Service tax is levied even on the Restaurants which do not have a license to
serve alcoholic beverages. This was a major change for the Industry as
thousands of Restaurants and eating joints including small and medium came
within the ambit of Service tax by such amendment.
Related Post : Service tax implication on AC Restaurants
Services-Clarification dated 07.10.13
However, questions were raised
whether Take-away or Home delivery of food from Restaurants, such as
McDonald’s, Domino’s, Pizza Hut etc., would also attract Service tax, as most
of these have air-conditioned dining space and some of these outlets have
dedicated counters outside air-conditioned halls for Take-away orders. A view
was entertained that Take-away or Home-delivery Orders should not be taxed
since no services, amenities etc. of the Restaurants were being offered to the
customers in case of Take-away or Home delivery of food. But, in the absence of
any clarification, the Restaurants continue to levy Service tax on the same.
Clarification by Chandigarh Commissionerate:
The
Service Tax Department of Chandigarh vide its letter C.No.
ST-20/STD/Misc./Sevottam/62/12/4693 dated August 13, 2015 (“the
Clarification”) has clarified that free Home delivery/ Pick-up of food is
not liable to Service tax.
The
Department explained the matter further by stating that the dominant intention
of such transaction is that of ‘Sale’ as food is not served at Restaurant and
no other element of service such as ambience, live entertainment (if any), air
conditioning or personalised hospitality is offered. It is further stated that
Service tax can be levied if there’s an element of ‘Service’ involved which
would typically be the case where food is served in Restaurant.
However,
the Department has further clarified that the above transaction is not liable
to Service tax, being sale in nature, only if no amount is charged for such
free delivery of food.
Our Comments:
Similar
Clarification on the stated matter is much needed from the Central Board of
Excise and Customs (“CBEC”), so that it could be made applicable
uniformly throughout, irrespective of the jurisdiction of particular
Department.
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