Service tax not applicable on ‘take away’ orders, food parcels: Madras HC

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The Madras High has Court has ruled that the Service Tax is not applicable on ‘take away’ orders collected from restaurants or eateries, in parcels.

The HC bench headed by Justice Anita Sumanth, held that such provision of food and drink ‘taken-away’ from restaurants would tantamount to only sale and not consumption at the restaurant attracting service tax. “In most restaurants, there is a separate counter for collection of the take-away food parcels. Orders are received either over telephone, by e-mail, online booking or through a food delivery service,” the judge said.

Popular restaurant, chain Anjappar Chettinad, RSM Foods, Prasanam Foods and Thalapakatti Hotels had moved the HC challenging the notices issued by the commissioner of GST and central excise demanding service tax for ‘take-away’ orders.

The petitioners had argued that the sale of packaged food constitutes pure trading activity and there is no component of service involved therein. Their argument was based on the definition of ‘service’ under Section 65B(44), which excludes the transfer of title in goods by way of sale. Due to this exclusion, parcel sales or take away food would stand outside the ambit of service tax.

Once ready for delivery, the parcels are brought to a separate counter and are picked up either by the customer or a delivery service, which is not even airconditioned in most cases. Earlier, opposing the pleas, the department relied on Section 66E(1) of the Finance Act which declares the activity of supply of food or any other article of human consumption or any drink as a taxable service. Thus, there is absolutely no infirmity in the impugned orders that have brought to tax the receipts from parcel sales/take away sales, authorities said.