CHENNAI: In a significant ruling, Madras high court has held that service tax would not be applicable on ‘take-away’ in restaurants and hotels.
Justice Anita Sumanth passed the order while allowing a batch of pleas moved by popular chain of restaurants, including Anjappar, Thalappakatti and Sangeetha Hotels, challenging the notices issued by the commissioner of GST and central excise demanding service tax for ‘take-away’ orders.
The bench held that such provision of food and drink ‘taken-away’ from restaurants would tantamount to only sale and not consumption at the restaurant attracting service tax.
“In most restaurants, there is a separate counter for collection of the take-away food parcels.
Orders are received either over telephone, by e-mail, online booking or through a food delivery service,” the judge said.
Once processed and readied for delivery, the parcels are brought to a separate counter and are picked up either by the customer or a delivery service.
More often than not, the take-away counters are positioned away from the main dining area that may or may not be air-conditioned.
Earlier, opposing the pleas, the department relied on Section 66E(1) of the Finance Act which declares the activity of supply of food or any other article of human consumption or any drink as a taxable service.
Thus, there is absolutely no infirmity in the impugned orders that have brought to tax the receipts from parcel sales/take away sales, authorities said.
“The provision of take-away food and drinks involves the rendition of service and the mode of sale, that is, by parcels, has no bearing in the matter.
The transaction in question should thus be bifurcated into one that involves both the components of sale and service and brought to tax accordingly,” the department argued.
Refusing to concur, the court observed that not all services rendered by restaurants in the sale of food and drink are taxable and it is only certain specified situations that attract tax.