The association, last week, repeated its request for written instructions on tax on various services by a restaurant.

All restaurants with an air-conditioner and/or liquor service have to charge the 5.60% Service Tax, whatever their nature of service i.e. dine-in, pick-up or delivery. The Ministry of Finance, GOI made this clear in its numerous meetings with the NRAI since the scope was expanded in the 2013 Union Budget. The association’s was lobbying to revert to the tax’s pre-2013 application.

Agreeing to the wider scope, the NRAI requested for written instructions on the expanded applications. The MoF has remained silent on this request, not issuing the clarification despite repeated reminders.

Therefore, the ongoing trend of customers challenging the levying of Service Tax – a Central subject – by restaurants is due to the Chandigarh administration contravening the MoF by removing the tax on pick-up and home delivery options.

“We first went to the highest levels of the revenue department at the MoF in 2013 to prevent the expansion of the scope of application. But when we realised that the GOI would not be moved, we requested for the written clarification so that restaurants would not be mis-understood. They have been silent on this, so we are in an unnecessarily difficult situation,” said Prakul Kumar, secretary general, NRAI.

The letter by Chandigarh’s deputy commissioner of central excise & service tax went viral and is often quoted by the media and consumers alike, usually out of context.

Issued to M/s Apex Restaurants Pvt. Ltd, the letter (C.No. ST-20/STD/Misc./Sevottam/62/12) is dated August 13, 2015 and states “that incase of the transaction involving pick-up or the home delivery of the food sold by the restaurant, the dominant nature is that of sale and not service as the food is not served at the restaurant and no further element of service which is offered by the restaurant be it ambience, live entertainment, if any, air-conditioning, or personalised hospitality is offered. … The above transaction is not liable to Service Tax being sale in nature, only if, no amount is charged for such free delivery of food.”

However, a revenue official in another state, revealed that the Chandigarh authorities have no powers to change this Central Tax rule and therefore, it is wrong.

All restaurateurs – member or otherwise – are encouraged to contact the NRAI office for clarification and support in case of an emergency.