No Service tax on free Pick-up/Home delivery of food, being ‘Sale’ in nature – Chandigarh Commissionerate
The Government vide Entry No. 19 of the Mega Exemption Notification No. 25/2012-ST dated June 20, 2012 (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:
(i) Facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and
(ii) 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.
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.
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.
Copy of Official Text is as follows :-
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Email: firstname.lastname@example.org)