Service Tax At Your Doorstep…………………..
After quitting a plum job in a software company (and being a foodie by heart), Jackie decided to start his own restaurant. He obtained all the required approvals and permissions , got an experienced chef to run his kitchen and his venture was up and running. Within a couple of years his business had taken off like a rocket and was raking in the customers thanks to the quality of the food and the promptness of the service. On the advice of his auditor he also got himself a Service Tax registration. A few months down the line his business was growing at an amazing clip and hence he decided to roll out a takeaway counter and a free home delivery option. Like the billings at his restaurant Jackie charged service tax even on the takeaways and the home deliveries. A few weeks later his friend from Chandigarh called him and informed him that he did not charge service tax on the home deliveries as he had heard about a communication to the effect (from the dept.). On hearing this Jackie became perplexed and went to his auditor seeking a clarification………..
His auditor explained to him that recently there had been a letter written by a Deputy Commissioner of Central Excise & Service Tax division at Chandigarh to the owner of one of the restaurants clarifying that service tax was not applicable in case of takeaways and home deliveries as the dominant nature of such a transaction is that of a sale and not a service , for,
- neither is food served at the restaurant
- nor is there any other element of service like ambience , air conditioning , personalised hospitality , etc. offered.
His auditor further clarified that this would be the case only if the customers were not separately charged for the delivery (i.e. only in case of free delivery). However , since this clarification was given by the Chandigarh commissionerate and not the Central Board of Excise and Customs the applicability of the same across the country is in question. Hence for all practical purposes it may have to be assumed that service tax would be applicable on such transactions.