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Take-away orders to come under service tax ambit, FinMin to issue notification soon
Even as it has become expensive to eat out in an air conditioned restaurant from April 1 onwards after 12 per cent service tax became applicable on such joints as per the budget proposal, associations of restaurants and hotels have approached the Finance Ministry urging it not to bring the popular take-away transaction and order from home service under the tax ambit.
The ministry on its part though has said that it would soon be coming out with a circular making it clear that service tax would be levied on such transactions as otherwise there is bound to be a lot of "mismatch" in terms of tax filed by the hospitality industry vis-à-vis the actual tax collected by the Government.
The move, once it comes into effect, is expected to hit hard millions of take-away joints and restaurants dotting cities across the country.
Still smarting from the Union Budget's proposal to levy service tax on air conditioned restaurants from the freshly begun financial year (2013-14) onwards, the restaurant and hotel owners have petitioned North Block seeking service tax exemption on take-away orders, claiming that since none of their services are used by customers while placing such orders, this sort of transaction should not be taxed.
Though there is no clarity as of now on whether service tax would be levied on transactions like these where a customer either buys packed food from an air conditioned restaurant or orders the same from home telephonically, Finance Ministry sources told The Pioneer that despite protests from restaurant owners, it is in the process of drafting a notification stating that such transactions would be brought under the ambit of service tax levy.
Ministry officials confirmed that a slew of representations from various associations of restaurant and hotel owners have been reaching them ever since it was announced by Finance Minister P Chidambaram in the Union Budget on February 28 that all air conditioned restaurants would have to pay service tax.
The point put across by the restaurant owners in the representations, sources said, was that since the customers don't use their premises while ordering food telephonically or getting it packed personally and in the process, their air conditioning facilities also don't get used, therefore service tax should not be levied on such transactions.
Sources said that the ministry as of now is carefully assessing these representations and discussions have been held at the top level (read the Finance Minister) also. However service tax would be levied on take home transactions as not doing so would lead to a lot of disparity in tax collections.
A notification therefore making it clear that service tax would be levied on such transactions would come out soon, they added, mainly to clear the air about the ambiguity prevailing on whether these transactions should be taxed or not.
More so as the new financial year has already begun and any delay in announcing the move would not only add to the confusion among the service provider but at the same time may also lead to a situation where there could be a possible evasion of service tax by restaurant owners, sources added.
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I'm optimistic about what we can achieve at the climate summit, because I've seen America take incredible strides in last seven years.