Ruling May Impact GST Taxability of Takeaway Transactions
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has recently ruled that no service tax can be levied on the activity of takeaway of food items sold by restaurants. The ruling was made in the matter of Haldiram and is significant as it may impact the GST taxability of takeaway transactions.
The issue before the CESTAT bench was whether the activity of takeaway of food items sold by restaurants would amount to a service and attract service tax. The tribunal observed that the activity of takeaway did not involve any element of service and would amount to sale. Therefore, no service tax could be levied on the same.
The ruling by the CESTAT is significant as it provides clarity on the taxability of takeaway food items sold by restaurants. This is likely to have a significant impact on the industry as it removes ambiguity regarding the applicability of service tax on takeaway transactions.
Although the ruling pertains to a pre-GST regime issue, there are debates about its implication in the GST regime. Currently, GST is applicable at the rate of 5% on restaurant services, including takeaway. The CESTAT ruling may have a contentious impact on the taxability of takeaway transactions as a supply of restaurant service.
It has been argued that if takeaway food items are not to be considered as a supply of restaurant service, then the 5% GST rate may not be applicable on such transactions. This may result in a reduction in the overall tax liability of restaurants selling takeaway food items.
The ruling by the CESTAT is likely to provide much-needed relief to the restaurant industry, which has been struggling due to the impact of the COVID-19 pandemic. The industry has been lobbying for a reduction in the overall tax liability on restaurant services, including takeaway.
The CESTAT ruling is also significant as it sets a precedent for future cases involving the taxability of takeaway food items sold by restaurants. The ruling clarifies that the activity of takeaway does not involve any element of service and would amount to sale.
In conclusion, the ruling by the CESTAT provides clarity on the taxability of takeaway food items sold by restaurants and is likely to have a significant impact on the industry. The ruling may also have a contentious impact on the taxability of takeaway transactions as a supply of restaurant service under the GST regime.