Service tax on restaurants

This query is : Resolved

Mohd Sarfaraz Latibani (Querist)
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18 October 2011 Is service tax applicable for restaursnts.

1. I have a restaurant which is serving Fast food and snacks only.

2. It is air conditioned?

3 It doesn't serve liquor.

Does service tax apply to my restaurant

Thanks

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)
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18 October 2011 In the Budget 2011, it was proposed to levy Service Tax on Hotels & restaurants. Vide Notification 29/2011 dated 25.04.2011, 1st May of 2011 has been declared as the appointed day on which these provisions will come into effect. Thus these services are taxable with effect from 01.05.2011.

Restaurant Service:

Restaurant Service has been defined in clause (zzzzv) of Section 65(105) which reads as,
“(zzzzv) to any person, by a restaurant, by whatever name called, having facility of air-conditioning in any part of the establishment, at any time during the financial year, which have license to serve alcoholic beverages, in relation to serving of food or beverages, including alcoholic beverages or both, in its premises.”

The definition results in following prepositions of law;

A. A restaurant having air-conditioning facilities and license to serve alcoholic beverages have been covered under the Service Tax net. Both the conditions must be satisfied. If the restaurant is not air-conditioned or it does not have license to serve alcoholic beverages, there is no service tax.

It is not necessary that the facility of air-conditioning is available round the year. If the facility is available at any time during the financial year the conditions for the levy shall be met. The levy shall not cover either the meal portion in the composite contract or mere sale of food by way of pick-up or home delivery, as also goods sold at MRP.

B. The taxable event is “serving of food and beverages in its premises”. Thus home delivery services, food pick up joints shall not be covered.

C. Vide Notification 34/2011-ST dated 25.04.2011, service tax is leviable on 30% of the gross amount charged if the assessee is not availing Cenvat Credit/benefit of notification 12/2003-ST dated 20.06.2003.

Hence your restaurant is not covered under service tax net, because if it does not have license to serve alcoholic beverages, there is no service tax.