HC seeks response from Centre over service tax on restaurants
September, 06th 2011
The Delhi High Court today sought response from the Centre on a plea of the Federation of Hotels and Restaurants Association of India challenging imposition of service tax on food and beverages served in air-conditioned restaurants and hotels.
A bench headed by Chief Justice Dipak Misra directed the Centre to file its reply on the plea of the association (FHRAI).
The Centre, by the Finance Act (Amendment)-2011, has imposed service tax on sale of foods and beverages in air-conditioned restaurants and hotels.
"The impugned provision of the Finance Act is illegal, null and void and ultra vires the Constitution of India," the association pleaded.
The association further said the law in relation to sale of food and beverages served by the restaurant to any person can be made by state only as it is a state subject.
"Tax on sale of food or beverages served by restaurant to any person in the said restaurant is a matter covered by Entry-54, List 2 and consequently only the state legislature is empowered to legislate," the petitioner said.
The petitioner added that the sale of food and beverages is sale of goods and not rendering of services and hence not liable to pay service tax.
"The transaction of selling of food and beverages in air-conditioned restaurant or in any part of establishment having licence to serve liquor amounts to sale of goods and hence the entire value of goods and beverages sold is nothing but sale of goods and falls within exclusive competence of the state legislature," FHRAI said.