In a notable ruling, the Madras High Court has held that service tax would not be applicable on takeaway 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 takeaway 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 takeaway food parcels. Orders are received either over telephone, by email, online booking or through a food delivery service” said the judge.
Once processed and readied for delivery, the parcels are brought to a separate counter and are picked up either by the consumer or a delivery service. Generally, the takeaway 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 66 E (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/ takeaway sales, authorities said.
The department argued that, “The provision of takeaway food and drinks involves the rendition of service and the mode of sale, that is, buy parcels, has no bearing in the matter. The transaction in question should thus be bifurcated into one that involves both the component of sale and service and brought to tax accordingly.”
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.
