New Delhi, June 23 (): Home delivery and takeaways by eating joints will be exempted from service tax by the Finance Ministry, a move that will benefit Pizza Hut, McDonalds and Dominoes. A major portion of the business of this brand is in home delivery and takeaway. This service is given free and a service tax on this would only dampen the business.
Finance Minister P Chidambaram has told many in the hotel and restaurant industry that he would spell out the clarifications on the budget proposal to extend service tax to air-conditioned restaurants which served food. Earlier it was only for pubs and bars. As CBEC did not specify in the rule, those who ordered from home or took away parcels were levies service tax. Many who levy service tax did not deposit it.
Prior to the amendment the courts had termed takeaway as service of goods and brought in under the sales tax of the State. Restaurants are permitted 60% abatement and service tax of 12% is on the 40% of the total bill. The service tax clause has caused confusion in those joints that have only partly AC service. These hotels have a separate tariff for the menu in the AC area. These hikes are for the air conditioning and now a service tax would only increase.it. This would give scope for evasion as the billing would be shown as service rendered in non AC area. The full air conditioned joints that levy service tax on home deliveries and parcels are likely to take advantage of the new clarification by showing a major part of the business under this head to evade service tax. Keeping a tab on this is not possible.
McDonalds and other pizza joints claim that a small 12% on the 40% of the bill is not affected their trade since the customers does not mind paying for the quality that the brand offers.