Esha Agrawal

Esha AgrawalRESTAURANT SERVICE CLARIFICATION

Hello everyone here i am again with an another article of mine on services provided by a restaurant in relation to food or beverages eating joint or mess other than those having the facility of air conditioned or central air heating in any part of the establishment at any time during the years

As we all know that supply of food or beverages ( in restaurant) is deemed sale ( as per article no. 366 of constitution of India) all deemed sales are outside the scope of service tax as they are liable to VAT, only service charges for supply of food or beverages is taxable under service tax , except the restaurant having the facility of air conditioned or central air heating in any part of the establishment at any time during the years, the restaurant who provide service in relation to food or beverages eating joint or mess having the facility of air conditioned or central air heating in any part of the establishment at any time during the years is liable to service tax.

There are so many doubts on this topic like a complex having both air conditioned and non air conditioned restaurant providing food from the common kitchen does service tax levy on non air conditioned restaurant ??????????????

The clarification is yes service tax is levied on the non air conditioned restaurant also because the restaurant is not separately demarcated, but if the complex having more than one restaurant which are clearly demarcated and separately named and food is provided from the common kitchen, only the service provided in air conditioned restaurant is liable to service tax , service provided in a non air conditioned restaurant or non centrally air heated restaurant will not liable to service tax and is treated as separate exempt service..

Another doubt in a hotel services provided by a restaurant in other areas like swimming pool or open area attached to the restaurant will liable to service tax ??????????????

The clarification is yes services provided in other areas attached to restaurant are also liable to service tax.

Another doubt whether service tax is leviable on goods sold on MRP basis as part of bill/invoice???????????

The reply is if the goods sold on MRP basis (fixed under legal metrology Act) they have to be excluded from the total bill to derive at the value of service portion .

One more doubt ,services provided in relation to serving of food or beverage by a canteen in factory covered under factories act 1948 having the facility of air conditioned or central air heating ???????

The clarification is No service tax on serving of food by canteen in factory on both the air conditioned canteen as well as non air conditioned canteen .

These doubts can be explained with the help of an example, suppose we take an example of a 5 star resort and spa in Goa named “Taj Exotica” having more than one restaurant , an air conditioned Italian food restaurant , a non air conditioned Goan food restaurant and an Indian food restaurant which has air conditioned as well as non air conditioned part not clearly demarcated, but the food is sourced to all the restaurant from the common kitchen, the resort is also having a swimming pool where people can sit and enjoy food, sales counter are also in the resort where goods are sold eg cigarettes, handloom, costumes etc

The Italian food restaurant (air conditioned) is liable to service tax as the restaurant is serving food or beverages having the facility of air conditioned , another restaurant Goan food(non air conditioned) service tax is not leviable as restaurant is not having the facility of air conditioned, another restaurant serving Indian food( both air conditioned as well as non air conditioned) tax is leviable on the whole restaurant air conditioned as well as non air conditioned because the non air conditioned part is not clearly demarcated and separately named from the air conditioned part , the swimming pool area of the hotel from where the food is sourced through common kitchen is also liable to service tax, now the shops in the resort where goods are sold on MRP basis (if fixed under legal metrology act) are not liable to service tax and value of goods are excluded to derive at the value of service portion .

Another example of chotiwala foods and restaurant in Haridwar , the hotel is having two section air conditioned as well as non air conditioned not clearly demarcated and separately named , the service tax is levied on the whole restaurant because the restaurant is not clearly demarcated and separately named .

So this is the treatment of restaurant service

Hope you enjoyed reading the article and gain some knowledge from this. If you have any queries please ask me i will try to solve it, you can mail me at agrawalesha6@gmail.com.

Thanks for reading!!!!!!!!

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0 responses to “Service Tax on Restaurant Services – Clarification”

  1. raju says:

    hi, am raju ,am service tax return filing now but am not paid tax,
    return is half yerly basis, wat is the consequences taht ,
    may i pay the tax now,
    this is the pvt ltd company , could u please the service tax due dates in company half yearly basis tax rerurns.

  2. Punit jain says:

    Hello Esha,

    Can you just help me if there is any case law or notification regarding non applicability of service tax for food supplied to workers in a factory. Also note the food is just supplied by the contractor not served even. Whether this will attract service Tax.

    Regards,
    Punit Jain.

  3. kalyan says:

    thanks for your article

  4. srinivas says:

    Further i want clearification if in a factory premises canteen serivice provided by the contractor in this case as service tax is not chargeble now the point is on what amount he can clame the VAT.

    Regards,
    Srinivas

  5. Ankur says:

    This service tax in AC restaurants should be termed as LUXURY TAX instead of service tax.

    Becoz, we are getting SELF-SERVICE in most of them.

    Just by putting AC , we are only getting bit of luxury( in terms of government).

    Isn’t it?

  6. Mansingrao Javir says:

    Hi…

    Definitely helpfull article.

    Thank you so much for your article.

  7. GMR says:

    Thanks for your article.

    If Food service near Swimming pool , in open terrace and demarcated as separate area with different name , is Service Tax applicable. Food served from common kitchen.

  8. Rajulu says:

    What is the position of home delivery of food by an air-conditioned restaurant?

  9. shah manoj bachubhai says:

    author,
    please express your opinion regarding cenvat credit on input service with example. This is also necessary to pay attention towards cenvat problem. i hope you will write on the subject, because liability goes with cenvat benefit also. Your valuable opinion is awaited.
    manoj shah

  10. satyanarayana chunduru says:

    hi

    the way you narrate article is good.

  11. s sudarshana says:

    correction : “…AC or non-AC space and to kitchen.” is to be read as ‘NOT to kitchen’. Typographic error regretted.

  12. s sudarshana says:

    The tax is levied to the customers in AC or non-AC space and to kitchen, where it is prepared. Preparation and supply in the factory, in canteen AC or otherwise is not to be mixed up to confuse the issue.

  13. Esha Agrawal says:

    Hello Dear,
    I want to say that if food is served to both ac and non ac restaurant which are not separately demarcated then service tax is levied on the whole but if the food is served to both ac as well non ac which are separately demarcated then service tax is levied on ac portion only here key point is whether separayely demarcated or not, in case of Goa food restaurant it is non ac restaurant so mo question of service tax, hope your doubt is cleared
    thanks and regards
    Esha Agrawal
    eshaag6@gmail.com

  14. Nitin Grover says:

    Dear Friend

    There is one confusion that you said if Food served from common kitchen to AC or NON AC restaurant then both units will be covered under service tax. (except if there are restaurants with diff names)

    In case of 5star hotel example you said no need to charge service tax in Gao food portion.

    further few things are not clear to me.

    #Article is too good to understand the concept.

    Thanks and Regards Always
    Nitin Grover (ACS)
    nitinsgrover@gmail.com

    +91 – 95 82 00 94 94

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