No Service Tax on Free Home Delivery or Pick up of Food

It was a wide issue amongst the big restuarants among the country such as Dominos, Pizza Hut, etc. for the problem that would service tax be liable for foods delivered for home dleivery where no service is acually provided. Inspite of this issue all the big restaurants ignorance of the fact that no service is provided where charging service tax for the same. The solution was answered by one of the courts as the issue arrised for the service tax non payment of one of the restaurants. The Brief of the same is explained here.

The above issue was faced by one of the restaurants named as M/S APEX RESTAURANTS PVT LTD. , in which the restaurants didn’t collected and paid the service tax to the department. In which the department responded back and to that issue the clarification was given by the restaurant which was absoulety correct and the department also approved the clarification and the department issued a new notificaion for the same dated 13^th August 2015.

It was the case of M/S Apex Resturants Pvt Ltd V/S Central Excise Department of Chandigarh Where it was very much easily clarified that the food which was delivered at the home as free delivery without any of the other emoluments will not be covered under the definition of service and hence no service tax liability will arise.

The notification was clearly stating that “the dominant nature of transaction is sale and not service as the food is not served in the restaurant and further no element of service which is offered at the restaurants, be its ambience, live entertainment, if any , air conditioning or personalized hospitality is offered”. It clearly means the physical delivery of the food at the restaurants having any of the above facility is only liable to collect and pay service tax otherwise not.

The Service Tax can be levied only where there is typically “Service” involved which is applicable in case of restaurants where service is actually involved, which means that if for eg. Hotel X is not Air conditioner then it won’t be liable for collecting and paying service tax but if Hotel Y is having Air conditioner but not having Live Entertainment then also service tax liability will arise as specially says that it should cover “any” of the above and not “all”of the above. So the restaurant having any of the above facility will have to collect and pay service tax on the invoice amount.

Exception :-

The Big Exception to it is that there would be no service tax only when there is “Free” Delivery or Pick up , If separate charges for the same are charged in the invoice then there would be service tax liability on the service tax provider. For Eg if Hotel Z provides Free Home Delivery upto 3 kms from the shop then if the order is delivered within 3 kms would be exempt but beyond 3 kms it would be taxable.

Approval :-

The notification was given by the deputy commsioner on 13^th August 2015, with the prior approval of Additional Commsioner and the same is in force from the said date.