04 December 2016

Service tax on AC Restaurants is Unconstitutional


Service Tax on AC Restaurants is unconstitutional

November 24, 2016[2016] 75 taxmann.com 272 (Kerala)
Service Tax : Levy of service tax on Air Conditioned Restaurants is unconstitutional since when food is supplied as part of any service, such transfer would be deemed as sale. Thus, there is no component of service which could be charged to service tax when food is supplied by Air Conditioned Restaurant
• The Kerala High Court held that levy of service tax on air conditioned restaurants is unconstitutional. It relied on its own judgment in case of Kerala Classified Hotels & Resorts Association v. Union of India [2013] 35 taxmann.com 568 (Kerala) where it was held that the Article 366(29A)(f) of the Constitution empowers the State Governments to impose sales tax on supply of goods, whether it is by way of or as a part of any service and when food is supplied as part of any service, such transfer would be deemed to be a sale. Thus, there is no component of service which could be charged to service tax when food is supplied by Air Conditioned Restaurant.
Editor's Comment:
• The Government [vide LETTER C.NO.ST-20/STD/MISC./SEVOTTAM/62/12/4693, DATED 13-8-2015] has clarified that service-tax could not be levied either on takeaway orders or home deliveries by the Air Conditioned Restaurants.
• In case of takeaway orders or home deliveries, the dominant nature of the transaction is that of sale and not service, as the food is not served at the Restaurant. Further, no other element of service is offered at the Restaurants, be it ambience, live entertainment, Air Conditioning, or personalized hospitality. The Service tax can be levied if there is an element of 'Service' involved which would typically cover the case where food is served in Restaurant.
• However, the Kerala High Court held that the goods sold at Restaurants could only be considered as sale, irrespective of the fact whether any service is involved in it or not. The aforesaid ruling of the High Court is pending before the Apex Court. 

6 comments:

  1. The greater part of us would prefer not to contribute a lot of cash only for their repair our Air Conditioner. ac repair

    ReplyDelete
  2. The most affordable solution for ac repair is to enroll in a preventative maintenance package. hvac service

    ReplyDelete
  3. Your contents are wonderful and advisory. air conditioning companies

    ReplyDelete
  4. They have panel of expert service technician who can offer you the best of services at a nominal charge. Spring AC Repair

    ReplyDelete
  5. An AC repair company provides every type of services, like: AC installation, AC servicing, Duct Cleaning, AC maintenance, and other AC related services. www.contractorstoday.com

    ReplyDelete
  6. Much obliged for each other educational site. The spot else might just I understand that sort of data written in such a perfect means? I have an endeavor that I'm a little while ago working on, and I have been watchful for such data. wedding limos

    ReplyDelete

What do you think about this? Please write your comment.