In what could perhaps be a landmark decision with regards to reviving the Restaurants business, the Madras High Court passed an order that there would be no “Service Tax” payable for non-Dine in orders such as take-away & delivery services.
Justice Anita Sumanth passed the orders on 4 June 2021 allowing a batch of pleas moved by popular chain of restaurants in Chennai and Tamil Nadu including Sangeetha Hotels, Thalapakatti, Anjappar among others who challenged the notices issued by the Commissioner of GST and Central Excise demanding service tax for all transactions being undertaken.
They argued that the food was not being consumed within the premises of the restaurant hence no “service” was being offered. Thus, Service Tax was not tenable in such a case. The parcel is consumed at a different place by the consumer, therefore there is no case of paying such a “Service Tax”.
At the outset, the argument seems logical from the point of the sellers (outlets). However, it would be extremely difficult from a Compliance point of view to segregate the business arriving out of dine-in vs take-aways. For Ex. Dominos Pizzas serve the dine-in as well as take-away food in corrugated parcel only. It is up to the customer to consume it within the outlet or otherwise.
Similarly, many restaurants, especially the famed “Darshini” restraurants in Karnataka offer self service where in the customer picks the food from one place and consumes it within the premises, mostly standing. Technically, this is within the premises but the billing could be differently done.
It is to be seen whether the GST Department will push the case further up to a higher court for review.