New Financial Year :Service tax on home-delivered food !

Welcome to New Year – the Financial New Year 2013-14………  the  Financial year has drawn to a close and today most of us start the new FY with more hope and aspirations………. that it will continue to be good.

Perhaps it is time for partying too….celebrating the achievements that you had in the last year and patting self on the back for all the hardwork put in… there is a small catch… if you are to order something in Office, perhaps, you may have to pay more ~  not just to eat out but also for the pizza delivered at your doorstep, or a burger you have picked up to have in your car or even the lunch in your office canteen. Yes there is one more burden on common man…. some additional services brought under Service tax net.   Read an interesting report on Economic Times on Service Tax….. [the following highlighted text  is  a reproduction of that article of Economic Times of date]

In the absence of proper clarity on a service taxprovision, most home-delivery chains, takeaway joints, food & beverage outlets at theatres, self-service outlets and a clutch of air-conditioned entities are likely to play safe and impose the tax . The budget 2013-14 had extended service tax to all air-conditioned restaurants, without distinguishing between a restaurant, eating joint, canteen or a mess, leading to confusion on whether service tax should be imposed on these entities or not from April 1. Tax experts, however, say that service tax can be levied only if there's a component of service involved.

"Service tax can only be levied if there's an element of 'service' involved which would typically be the case when one goes to a high-end restaurant. In case where food is just bought as 'takeaways' or in case of home deliveries, there's no service or it is incidental to the actual sale of food," said Pratik Jain, partner, KPMGIndia.   What's added to the confusion is a missive sent out by the finance ministry when the levy was first introduced in 2012 on air-conditioned restaurants serving alcohol. The letter had stated that the levy is directed at high-end restaurants and is not to be confused with sale of goods at an eatery, where service is materially absent or, at best, minimal. The valuation rules put out by the Central Board of Excise and Customs for valuing service part of the activity of a restaurant also do not provide any method for valuing the service portion for eating joint or a mess.

The rule provides that value of service portion, where goods being food or any other article of human consumption or any drink, is supplied as part of the activity at a restaurant would be 40% of the total amount.  Industry feels that these entities should not be taxed as they do not provide any restaurant service and has petitioned the finance ministry, which is examining the matter and could issue a clarification soon.

If you among the one already unhappy with the food supplied and the service that accompanies it, perhaps you have a serious grudge on this new service tax on a non-service part…. It is shining, hot summer.. enjoy yourselves.

With regards – S. Sampathkumar.