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Policy Nov, 10 2014

Customers to be tax free at AC restaurants: Kerala HC

The court said that the bill raised on the customer cannot be split as charged for the service part and as charged for the food part.

By Franchise India Bureau
Customers to be tax free at AC restaurants: Kerala HC

Customers will no longer have to pay extra taxes levied on them at air conditioned restaurants or a bar announced Kerala High Court, as per a report in ET.

This will bring a relief to customers who earlier paid approximately 12.36 percent service tax on 40 percent of the total bill amount, a division bench of the Kerala high court said the Union government's decision to impose service tax on food and beverages served at such restaurants was not within the competence of Parliament.

Upholding a single judge order, the division bench said, “It cannot be said that it is an activity of service. When the said activity is deemed to be a sale of the food and other articles of human consumption by a constitutional definition, tax on the said activity can be imposed only by the state.''

The court said that the bill raised on the customer cannot be split as charged for the service part and as charged for the food part.

The Union government had moved the HC in appeal against the single bench order. The Kerala Bar Hotels Association's argument was that the supply of food and beverages in a restaurant is a sale, enabling states to impose tax on the same.
The HC further said that states alone have the legislative competence to enact any law imposing tax on this issue.

Related: Vikram Bakshi asks McDonald's to return leased properties

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