You won't have to pay extra tax for food and beverages you consume from either an air-conditioned restaurant or from an air-conditioned restaurant run alongside a bar.

Bringing relief to customers, who otherwise would've had to pay 12.36% service tax on 40% of the total bill amount, a division bench of the Kerala high court said the Union government's decision to impose service tax on food and beverages served at such restaurants was not within the competence of Parliament.

Upholding a single judge order, the division bench said: It cannot be said that it is an activity of service. When the said activity is deemed to be a sale of the food and other articles of human consumption by a constitutional definition, tax on the said activity can be imposed only by the state.''

The court said that the bill raised on the customer cannot be split as charged for the service part and as charged for the food part, though it may be part of the service that she renders by providing good furniture, furnishings, fixtures, linen, crockery and cutlery.

The Union government had moved the HC in appeal against the single bench order. The Kerala Bar Hotels Association's argument was that the supply of food and beverages in a restaurant is a sale, enabling states to impose tax on the same. These hotels have been paying turnover tax on the sale of food and beverages besides luxury tax on the amounts charged from the customers for accommodation.

The HC further said that states alone have the legislative competence to enact any law imposing tax on this issue.(Times of India)