mumbai some restaurants collect service tax from customers against home delivery or takeaways primarily to protect themselves from litigation but tax experts say such forms do not involve any element of service and no service tax should be collected next time you order a pizza from a wellknown chain or paneer tikka from your neighborhood joint and have it delivered to your home or office be sure to check the bill again chances are you may find that while one restaurant has levied service tax another has not to illustrate if your home delivery order is of rs 1500 and the restaurant has decided to levy service tax you will end up paying rs 1584 service tax is charged on 40 of the customers bill which at the current tax rate of 14 brings the effective tax rate to 56 or rs 84 in this case this sum of rs 84 is not pocketed by the restaurant but is collected by it and passed on to the governmentread also service tax hike to eat into your budget tax experts view that a bill for home delivery of food or a takeaway should not include any service tax explains sunil gabhawalla chartered accountant and indirect tax expert while introducing service tax on restaurants in 2011 the government issued a clarification that the service tax levy is intended to be confined to the value of services contained in the composite contract and shall not cover either the meal portion in the composite contract or mere sale of food by way of pickup or home delivery though not legally required to some restaurants do levy service tax even on takeaways or home deliveries for various reasons unless the restaurant has a strong backend record maintenance process it becomes practically difficult to substantiate during an indirect tax audit which portion of the revenue earned was via takeaways the risk of litigation tempts some restaurants to levy service tax even when the meal is not served inhouse also in cases where restaurants levy service tax they do get a cenvat credit which they can use to offset indirect taxes they have to pay thereby benefitting to an extent in the process adds gabhawalla last month a deputy commissioner based in chandigarh clarified in writing to a query raised by a local restaurant that service tax is not liable on takeaway or home deliveries as no service element is involved such deliveries made free of cost are in the nature of sale of meals rather than a service the dominant nature of the transaction is that of sale and not service as the food is not served at the restaurant and further no other element of service which is available at the restaurants be it ambience live entertainment if any airconditioning or personalized hospitality is offered the written clarification stated this clarification which has caught the attention of customers has prompted the national restaurant association of india nrai to again seek a written clarification on the