Composite supply of food and drinks in a hotel remains taxable where sale predominates and service is merely incidental.

Article 366(29-A)(f) enlarges the concept of sale to include supply of food or other consumables in a service transaction, and the same approach applies to explanation (3-A) to section 2(1)(t) of the Karnataka Sales Tax Act. Restaurant transactions are taxable where the substance of the deal is the sale of food and drinks and any service element is merely incidental; only where the dominant object is rendering service may the supply fall outside sale. On the facts described, the petitioner did not establish that hotel transactions were primarily service-oriented, and the mere employment of staff was insufficient to displace taxability.

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Issues: Whether the supply of food and drinks by a hotelier was taxable as a sale under article 366(29-A)(f) of the Constitution and explanation (3-A) to section 2(1)(t) of the Karnataka Sales Tax Act, 1957, and whether bifurcation of turnover to exclude the service element was required.

Analysis: The amendment introducing article 366(29-A)(f) enlarged the meaning of sale to cover supply of food or other consumables as part of a service transaction. The earlier restaurant cases showed that where the dominant object of the transaction is rendering of service, the supply may not amount to a sale, but where the substance of the transaction is sale of food and the service element is merely incidental, the transaction remains exigible to tax. Explanation (3-A) to section 2(1)(t) was construed in the same manner. The petitioner did not plead or establish that the dominant object of the hotel transactions was rendering of services rather than sale of food and drinks, and the mere employment of staff did not prove otherwise.

Conclusion: The supply of food and drinks in the petitioner's hotel was not shown to be outside the taxable concept of sale, and the challenge to the assessment failed.

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