Takeaway food will not to attract service tax, CESTAT (Customs, Excise & Service Tax Appellate Tribunal) has ruled in the matter of Haldiram. Though this ruling relates to a pre-GST regime issue, there is feeling that it could have an impact on GST too. 

At present, GST is applicable at the rate of 5 per cent on restaurant services, both in the case of dine-in in the premises or takeaway. GST on dining in a restaurant within hotels, where the daily room tariff is Rs 7,500 or more, is 18 per cent. While 5 per cent rate is without input tax credit, 18 per cent rate is with input tax credit.

CESTAT in its ruling delivered last week said: “It has to be held that no service tax can be levied on the activity of takeaway of food items as it would amount to sale and would not involve any element of service.” 

Delhi-based Haldiram Marketing is engaged in running food outlets where customers can either purchase packaged foods such as sweets or namkeen, or avail of restaurant dining facilities. Additionally, the appellant also provides the facility of ‘takeaway’ of food items.

The bench took the reference from an order passed by the Commissioner (Appeals) in the matter of Anjappar Chettinad (2019) and noted that it was accepted by the tax department. That order had said: “In the appellant’s case the activity neither falls under restaurant service as the food is not consumed in the restaurant/ any part of the restaurant, nor under outdoor catering as the food/ beverages are served in the customer’s premises. Under the circumstances, I am of the opinion the appellant is not liable to pay service tax on such take[1]away/ parcel/ home delivery sales.”

The bench said when the department has accepted the decision of the Commissioner (Appeals) that no service tax is leviable on takeaway food items, it is not open to the department to take a contrary stand in this appeal.

The appeal arose after a showcause notice in 2020 issued proposing service tax demand of over Rs 23 crore with interest and penalties. The notice said the company provided services in respect of takeaway orders by way of preparing and packaging food items for the convenience of customers. The customers availed of the services of the chef by placing customised orders, and it was not a case of the company merely purchasing and selling food. The invoices raised by the company involved an inseparable service component charged from the customers. The value of goods was the same in respect of dine-in or takeaway orders. The Central Board of Indirect Taxes and Customs had also clarified, by way of a publication in leading newspapers, that takeaway food would also suffer service tax at the same rate as dine-in, the notice said.

Further, it said restaurant services were taxable as the service portion of an activity involving supply of food or drinks would constitute a declared service. It also clarified that exemptions were available only in case of non-AC restaurants and accordingly justified the demand.