WHETHER SERVICE TAX CAN BE LEVIED ON FOOD ITEMS UNDER PICK UP/FREE HOME DELIVERY SYSTEM

ISSUE FOR ADVOCACY

WHETHER SERVICE TAX CAN BE LEVIED ON FOOD ITEMS
UNDER PICK UP/FREE HOME DELIVERY SYSTEM

This is an ongoing problem faced by the consumers that they are burdened with number of taxes even when not enjoyed the ambiance of restaurant or hotel etc. This had been an issue raised several times about selling water at premium rates at places such as restaurants, hotels, airports and cinema halls. Public at large is often confused with the rules and regulations formulated by the Government authorities for adhering to MRP system on packed commodities and actual practice of selling .Weight and Measurement Department is to observe and check the compliance of MRP system . Food Safety and Standard Authority has also made rules and regulations in the year 2011 and also revised the same in 2013 for the packaged goods making it compulsory to print MRP and ingredients / the contents of the packed item. The issue of charging more than MRP by the hotels and restaurants was resolved by the Apex court by pronouncing a judgment that hotels and restaurants may charge more because consumer enjoys all ambiances and services also apart from getting food.
But what should be the system when neither consumer is served in the hotel/restaurant nor has enjoyed the ambiance. Can he be levied with service tax or service charges for merely placing order for packed food/pick up food under promise of free home delivery?
Office of Deputy Commissioner ,Central Excise and Service Tax Department got a query dated 22.7.2015 from Apex Restaurant Pvt. Ltd Chandigarh on this issue when consumers resisted to give service tax on free home delivery system .There was a reply/ clarification on the subject on 13.8 2015 as hereunder-
Food items given under free home delivery system is a sale of food and no service is provided, may it be serving food, ambiance of enjoying air cooling, live entertainment, personalized hospitality etc.Hence no service tax is to be imposed on such transaction .
There are further two more things clarified-
• Even while enjoying all air cooling and central heating facility available in the restaurant /hotels, service tax can be charged on food at the rate of 5.6% on the food bill.
• Further, tax can be imposed on 40% of the total food bill and not on the total bill.
But we see day in and day out that restaurants and hotels are charging service tax on all home deliveries. This is an issue must be brought to the knowledge of department concerned to circulate the policy so as to help the consumers for raising their voice against unfair trade practices being followed by the owners of hotels /restaurants and food caterers .

—————————————————————————————————DR PREM LATA

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Consumerism

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