Clarification: In a complex, if there are more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided by air-conditioned restaurant would be 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. The latter would be considered as exempt services and accordingly CENVAT Credit would be required to be reversed on the same.
Our Comments: The important condition is that the restaurants should be separately named.
2. In a hotel, if services are provided by air-conditioned restaurants in other areas like swimming pool or an open area attached to the restaurant, would service tax be applicable on the same?
Clarification: Yes, service tax would be applicable on services rendered by Air-conditioned restaurants in other areas of the hotel.
Our Comments: If the hotel has both air-conditioned and non air-conditioned restaurant and services are provided by non air-conditioned restaurants in the other areas, service tax would not be leviable on the same.
3. Whether service tax is payable 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 Legal Metrology Act), they would be excluded from total value for determination of value of service portion
Our Comments: The clarification seems to exclude those goods which are sold on MRP. If goods sold at a rate higher than MRP, the same might attract service tax net.
The circular has no doubt provided clarification on few aspects relating to restaurant services (whether correct or otherwise). However, CBEC has chosen to ignore certain important aspects which require clarifications from the department including:
- Availment of CENVAT Credit - Should supply of food be considered exempt goods / services and credit reversed on the same; and
- Applicability of service tax on takeaways / home delivery.