It is argued that supply of food is termed as a “deemed sale” which is charged to sales tax by the State Governments and as such it is not liable to service tax. :)
In this context it may be clarified that deeming the supply of food in a restaurant as a sale does not in any way bar the levy of service tax on the service provided by outdoor caterers which is primarily a tax on service rendered by an outdoor caterer. :roll:
It is pertinent to note that the service rendered by outdoor caterers is clearly distinguishable from the “indoor” services rendered in a restaurant or hotel. In the case of outdoor catering service the food/eatables/drinks are of the choice of the person who partakes of the service; s/he is free to choose the kind, quantum and the manner in which the food is to be served. As against this, while eating in restaurant or hotel where the customer’s choice of the food is bound by the menu card.
Again in the case of outdoor catering the customer is at liberty to choose the time and place where food is to be served. In the case of an outdoor caterer the customer negotiates each element of the catering service, including the price to be paid to the caterer. Outdoor catering has an element of personalised service provided to the customer the service element is the more weighty, visible and predominant aspect in the case of outdoor catering.
It may also be clarified that sale of food across the counter, as in fast-food joints/restaurants or serving of food in a restaurants/hotels do not fall within the ambit of outdoor catering. Nor does mere free delivery (or delivery at a nominal cost to cover transport charges) of food by a fast food joint, restaurant etc. shall be subject to service tax as in such cases there is no service element and only a mere sale of food.
You can also get more info. at http://servicetax.gov.in <link updated to site home> 27th February 2008 From India, Hyderabad