The finance ministry has come to a conclusion that service tax cannot be levied on takeaway and home delivery services.

The ministry is examining the structure of tax and constitutional provisions. Article 366 of the Constitution, on which the ministry relied, empowered state governments to levy tax on food supply during a service.

In the Union Budget 2013-14, service tax was extended to all air-conditioned restaurants. Although Central Board of Excise or Customs did not specify the applicability of service tax on takeaways and home deliveries clearly.This is where the confusion initiated from.
Air-conditioned restaurants, as a result of unclear specifications, started charging service tax on takeaways and home deliveries. The confusion aggravated when some service providers started imposing tax while others collected the tax but never deposited it.

Any clarity on the issue would bring relief to the industry, which has seeked clarification from the government, time and again, on the applicability of service tax.