Service portion of supply of food - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 9 Service portion of supply of food Effective date: 1.7.2012 Scope of Declared Service - Section 66E (i) Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. Analysis: The activity of serving food or drinks involves both goods as well as services. This entry covers service portion of such activity. These services are generally provided by a restaurant or caterer. An exemption is also provided to restaurants; eating joints or mess those do not have any facility of air-conditioning or central air heating in any part of their establishment during the year. Therefore as on date all air conditioned restaurants, mess, eating joints etc., which provide services in relation to serving food or beverages have been covered in this entry. Certain clarifications have been issued by the board regarding the exemption applicable vide Circular No. 173/8/2013 -ST, dated 7-10-2013 . Clarification by the Board (Taxation Guide - Guidance Note -6 - Exemptions dated 20.06.2012) 6.9.1 What are the activities covered in this declared list entry? The following activities are illustration of activities covered in this entry - Supply of food or drinks in a restaurant Supply of foods and drinks by an outdoor caterer In terms of article 366(29A) of the Constitution of India supply of any goods, being food or any other article of human consumption or any drink (whether or not intoxicating) in any manner as part of a service for cash, deferred payment or other valuable consideration is deemed to be a sale of such goods. Such a service therefore cannot be treated as service to the extent of the value of goods so supplied. The remaining portion however constitutes a service. It is a well settled position of law, declared by the Supreme Court in BSNL s case [2006 (3) TMI 1 - Supreme court, that such a contract involving service along with supply of such goods can be dissected into a contract of sale of goods and contract of provision of service. This declared list entry is has been incorporated to capture this position of law in simple terms. 6.9.2 Are services provided by any kind of restaurant, big or small, covered in this entry? Yes. Although services provided by any kind of restaurant are covered in this entry, the emphasis is to levy tax on services provided by only such restaurants where the service portion in the total supply is substantial and discernible.