Do Take aways offer any service? Do Pizzas and burgers delivered at your door step by Pizza Hut, Dominos, Mc Donald’s are free from service tax? What will be the service tax liability on Tuck shops? Are they completely exempt??? This article will explain you the service tax provisions on take away and tuck shop sales.

Our concern is whether Take-away or Home delivery of food from Restaurants, would 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.

While introducing service tax on restaurants in 2011, the government issued a clarification that the service tax levy is intended to be confined to the value of services contained in the composite contract and shall not cover either the meal portion in the composite contract or mere sale of food by way of pick-up or home delivery.

The scope of levy of service tax under the category of restaurants was clarified by D.O.F. 334/3/2011-TRU, dated 28-2-2011 which is reproduced below:

“1.1 Restaurants provide a number of services normally in combination with the meal and/or beverage for a consolidated charge. These services relate to the use of restaurant space and furniture, air conditioning, well trained waiters, linen, cutlery and crockery, music, live or otherwise, or a dance floor. The customer also has the benefit of personalised service by indicating his preference for certain ingredients e.g., salt, chillies, onion, garlic or oil. The extent and quality of services available in a restaurant are directly reflected in the margin charged over the direct costs. It is thus not uncommon to notice even packaged products being sold at prices far in excess of the MRP.

1.4 The new levy is directed at services provided by high–end restaurants that are air conditioned and have license to serve liquor. Such restaurants provide conditions and ambience in a manner that service provided may assume predominance over the food in many situations. It should not be confused with mere sale of food at any eating house, where such services are materially absent or so minimal that it will be difficult to establish that any service in any meaningful way is being provided.

1.5 It is not necessary that the facility of air conditioning is available round the year. If the facility is available at any time during the financial year the conditions for the levy shall be met.”

Thus, it now becomes crystal clear that CBEC intention is not to include the meal portion by way of pick up or home delivery. So, service tax is not liable on takeaway or home deliveries, as no service element is involved. Such deliveries made free of cost are in the nature of sale of meals rather than a service.

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.

Please Note on 9.9.2015, the Learned Deputy Commissioner concerned issued a letter to the Restaurant stating that his previous letter may be treated as withdrawn ab initio.

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. 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.

Restaurant service is declared service as per clause (i) of section 66E of the Finance Act, 1994 and provision of the same is as under:

“(i) service portion in any activity wherein goods, being food or any other article of human consumption or any drink ( whether or not intoxicating) is supplied in any manner as a part of the activity.”

From the above provision it is crystal clear that service tax is payable only on service portion of transaction. Inferences drawn from the above explanations are quite evident that as far as take aways or free home deliveries are concerned, they are out of purview of service tax. So, take aways are fully exempt, hence, no service tax liability arises since it it’s a mere sale of eatables with absence of any service element.

Now, moving on to ‘Tuck Shops’, firstly, we go by its meaning as under:

1. From Wikipedia, the free encyclopedia:

tuck shop is a small, food-selling retailer.[1] It is a term principally used in the UK, Ireland, Grenada, South Africa, New Zealand, Jamaica, Australia, India, and occasionally in other parts of the former British Empire.[2] In New South Wales, the term is interchangeable with the word canteen.

2. Dictionary.com Unabridged

Based on the Random House Dictionary, © Random House, Inc. 2016.

A tuck shop is a shop where pastry, candy, or the like is sold.

Tuck shops need very less space, as they function like retail outlets wherein packed food items plus MRP based items including snacks and cold drinks are also sold which greatly reduces the price of the food items.

Food is made and pre packed at some other place and packed food items are shelved on tuck shops. Tuck shops provide packed food available to the customers, employees, guests or visiting public where they are opened. Premises are not the property of tuck shop. Tuck shops are merely retail outlets where air conditioners are not installed.

These tuck shops are mainly opened for employees’ welfare. Most of the times these operators are self employed individuals and Company gives them space to run refreshment counter for employees. No sitting facility is offered to any buyer by tuck shops. Tuck shops are only providing pre-packed food and snacks items to buyers, which is not service but sale of food items.

As far as MRP based items are concerned, it is clarified in circular No. 173/8/2013-ST dated October 17, 2013 that value of goods sold on MRP fixed under Legal Metrology Act shall be excluded from the total amount for determination of taxable service. It is also stated that MRP items are branded cold drinks, juices, chocolates, potato chips, kurkure, energy drinks, etc which are first purchased from dealers/wholesalers and then sold as it is, without any modification. Further, this activity is termed as “Trading of Goods”. Hence, no liability arises for MRP based items sale under service tax.

(Author Details- CA Neha Gupta, B.Com, ACA, AIR (Final) 36, & associated with LNG & Associates, Chartered Accountants, Email: lng.cafirm@gmail.com)

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