You might be paying Service Tax unecessarily, making Govt. richer and triggering inflation

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Hi Friends, We all are now an app dependent individuals which makes our lives easy by just few swipes. One such, is online ordering of food which you want to get it home- delivered through online delivery apps.

Now, when you proceed for the payment of the sumptuous meal that you have ordered which is eligible for free home delivery, comes with a mini hiccup in last few line items of the bill called as the VAT and Service Tax. 

This petition doesn't challenge the right of the governement to levy and collect the tax from its citizens however, are we really knowledgable about the law?

Lets find out.

To keep it simple and non-technical the issue is

  • Do you really have to pay Service Tax on Food Bill which is delivered to your home WITH NO DELIVERY CHARGES?

Lets check (I am not quoting the section numbers and the legal language for simplicity)

The section clearly says that if you go to a restro which has an AC facility then you have to pay service tax on the abated value.

So lets dissect our issue

When I order my food through online delivery apps

  • Did I go to a restro with AC facility ? No, I ordered it through my app on phone sitting at home.
  • Did I pay the bill with Service Tax? Sadly, yes because of lesser understanding of the law by the masses.
  • So when should I or shouldn't I pay?
  1. If you ordered food for Rs. 100 and delivery charges are Rs.10 then Yes pay Service Tax only on Delivery Charges (Rs.10 x 15%)
  2. If you ordered food for Rs. 100 and No delivery charges then levity of Service Tax  is valid but you will pay Service Tax only on Delivery Charges (Rs.0 x 15%) i.e ZERO

Now, if you carefully look at your bill, first of all you are paying service tax on SALE of FOOD i.e Rs. 100 on which you have to pay VAT and because of rigid provision in the definition of goods, service tax on the abated value.

Now why is this happening?

  • People are unaware of the provisions and thereby becoming over protective of themselves to avoid litigations

Hasn't the government/courts clarified?

  • Yes, they have through circulars and notifications and certain jurisdictional judgements by the courts.

Are we making the government rich without it even asking for it?

  • YES

Are the restaurant owners and delivery apps playing safe?

  • Yes, by terming it as restaurant policy but only government has right to levy and collect tax.

What can you do?

  • Scrutinise the bill
  • Read the law, judgements, circulars, notifications
  • Never accept a bill which has a line item called VAT and Service Tax  ask for the break-up. Understand your bill
  • Its not about the amount involved, its about making unecessary payments thereby triggering inflation.

I hope many of us are facing this issue with none hearing us out.

I hope we can together make a difference and bring in more clarity and avoid wasteful expenditures which are never required to be made in the first place.


Thanks and Cheers!!!