Restaurant services under service tax
Meaning of restaurant services – Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, for some consideration or 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
Nature of services covered under this service
- Services should be provided in relation to serving of food or beverages
- Services should be provided by a restaurant, eating joint or mess
- Restaurant, eating joint or mess should have the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year
If all of three conditions satisfied cumulatively then service tax will be applicable on services provided by restaurants, eating joint or mess.
Rate of service tax applicable – the restaurants with AC/central heating and bar who are required to pay service tax under the act shall pay tax on 40% of total amount charged from the customer i. e. they are entitled for abatement of 60% on total amount of bill for discharge of service tax liability. and they can avail Cenvat credit of input services, capital goods and input goods other than food items
Subject to section 67 of Finance Act, 1994, the value of taxable service involved in the supply of food or drinks for consumption either in a restaurant or as outdoor catering, shall be the percentage of total amount charged for such supply, as follows –
But there are some more abatement rate are specified in act for different kind of activities and i.e. as follows
|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, at a restaurant||40% of ‘total amount|
|Service portion in outdoor catering 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 such outdoor catering||60% of total amount|
|Food as part of other services like convention, pandal, shamiana etc. (abatement scheme)||70% of total amount|
1) Doubt: In a complex where air conditioned as well as non-air conditioned restaurants are operational but food is sourced from the common kitchen, will service tax arise in the non-air conditioned restaurant?
Clarification : Services provided in relation to serving of food or beverages by a restaurant, eating joint or mess, having the facility of air conditioning or central air heating in any part of the establishment, at any time during the year (hereinafter referred as ‘specified restaurant’) attracts service tax. In a complex, if there is more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the specified restaurant is liable to service tax and service provided in a non air-conditioned or non centrally air- heated restaurant will not be liable to service tax. In such cases, service provided in the non air-conditioned / non-centrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules.
2) Doubt: In a hotel, if services are provided by a specified restaurant in other areas e.g. swimming pool or an open area attached to the restaurant, will service tax arise?
Clarification: Yes. Services provided by specified restaurant in other areas of the hotel are liable to service tax.
3) Doubt: Whether service tax is leviable on goods sold on MRP basis across the counter as part of the Bill/invoice.
Clarification: If goods are sold on MRP basis (fixed under the Legal Metrology Act) they have to be excluded from total amount for the determination of value of service portion.
Some clarification regarding applicability of service tax