No service tax on takeaway food items sold by restaurants: CESTAT
New Delhi, February 17, 2023
The CESTAT bench ruled that service tax cannot be levied on takeaway/ parcel food items sold by restaurants while hearing the pleas filed by Haldiram Marketing Pvt Ltd
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently quashed the show-cause notice to Haldiram Marketing Private Limited, passed by the Commissioner, CGST in March 2022, the Bar & Bench reported.
The CESTAT bench ruled that service tax cannot be levied on takeaway/ parcel food items sold by restaurants while hearing the pleas filed by Haldiram Marketing Pvt Ltd against the order passed by Central Goods & Services Tax Commissioner.
A division bench comprising President Justice Dilip Gupta and Member (Technical) PV Subba Rao noted that the Ministry of Finance had introduced the service tax for restaurant services in February 2011. The ministry had also clarified again on August 13, 2015, that the same would not be applicable to "pick-up" or "home delivery".
The bench clarified that no service tax can be levied on the activity of takeaway of food items as it would amount to sale and would not involve any element of service. The tribunal further added that a Service tax would only be applicable when services like dining facility, washing area, and clearing of tables are involved.
"It is seen that in the case of takeaway of food, the Appellant sells the food or packaged items, as chosen by the customer, over the counter and this would amount to the sale of goods. Services such as the dining facility, washing area, and clearing of the tables after the food has been eaten are, therefore, not involved. The activities of preparation of food and packing thereof by the appellant in the case of takeaway items are conditions of sale of such food, wherein the intention of the customer is to merely buy such packaged product from the appellant, and not to avail of any restaurant services," the bench noted, according to the Bar & Bench report.
Haldiram Marketing Private Limited had filed a plea challenging a show cause notice sent to it by the Commissioner of Central Goods & Services Tax (CGST) demanding payment of Rs 23 crores as service tax for takeaway services.
This amount also included the rent that the company received from its associated enterprises.
However, the CESTAT accepted Haldiram's contention that the rent received by it from the associated enterprise would not be leviable to service tax under the category of renting immovable property. The bench observed that "The goods of the associated enterprises are also being sold from same premises and a certain portion of the rent is received from the associated enterprise. The associated enterprises are benefiting with respect to the space," the bench opined.
[The Business Standard]