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Service tax on online order for eatables is illegal
September, 16th 2014

Service tax is supposed to be levied when someone uses the services while eating or drinking in a restaurant or hotel.

But what if you order eatables online? Do you still have to pay the service tax?

No, say tax experts, but most of the companies charge 4.94% service tax every time you order food or beverages online -- in violation of the rules.

According to tax lawyer Ajay Jagga, who has written to finance minister Arun Jaitley in this regard, the ministry of finance in 2012 had amended the Service Tax (Determination of Value) Rules, 2006, making charging of service tax where no service is involved unlawful.

"As per rules, the service tax should be imposed if there is a service like furniture, cutlery, among others, involved in a restaurant or hotel. But when you order something to eat or drink online, no service is involved and so charging service tax becomes completely illegal," said Jagga.

In his letter, Jagga has requested the FM to order chief commissioners and commissioners of service tax to issue public notices clarifying the rules in the larger public interest and for consumer protection.

"The Union government has although clarified the whole issue, but people are still being charged 4.94% as service tax for ordering food and beverages online," said Jagga.

He has further written to the FM that "the charging of service tax on online orders for home delivery or pick up of foods/beverages must be stopped at once and strict guidelines in this regard should be issued to online retailers."

Jagga had added in the letter that "the already sky-high inflation demands immediate stopping of the charging and collecting of service tax on online purchases of foods and beverages."

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