VAT ON SERVICE CHARGES ON RESTAURANTS

[krishna besta]

Dear Sir ( S),

Please resolve the below mentioned Two issue.

1. We have Restaurant and register under hotles under AP Vat Act. We have a CIM Packets (Chicken in Minute) is sealed under packet and we purchase from supplier it self with 5 % Vat and we are alos charged to the customers at 5 % based on  The provision of AP vat act Entry no.107 in Schedule IV as below.

107.(a) Preserved fruits, vegetables, meat, poultry, sea foods and fish sold in sealed containers or in a frozen state.

        (b) Fruit jams, jelly, fruit squash, fruit juices and fruit drinks but excluding aerated fruit drinks;

        (c) Cottage cheese (paneer), pickles, sauces, porridge, marmalade, honey;

         (The original entry “107.Processed meat, poultry, fish, processed or preserved vegetables and fruits, including fruit jams jelly, pickle, fruits squash, paste, fruit drink and fruit juice whether in sealed container or otherwise.” Was substituted by GO MS No 818 Rev (CT-II) Dept, dated30-06-2008w.e.f01-07-2008and subsequently by Act No 28 of 2008 dated24-09-2008w.e.f01-07-2008)

   But The above provision is not accepted by the CTO. He is looking in the angle of above provision only for with out adding any ingridiant but you are adding in that packet items like chat masala, salt and comopendents etc. He says that all ingridients are invloved in that packet item and it is ready to eat item and it lost earlier existence and emergence new commercialize food item.

2. Yes if we agree with the CTO. We are sale at 14.5 % of tax in the above metioned items. Here we have another issue. i.e we are sale the packet with charging the 14.5 %. but the customer after receiving the packet he wants to eat in the Restaurant it self. Tha CIM packet nature is ready to eat with frying in boiled Oil at any where. but customer asked fry it here and serve it. Now we are doing when ever we sale that packets we are charges with 14.5 % tax  and we charging for frying with out adding any tax why because the main product is Taxable and paid by the customer. Now just we fry and serve it for that against we charges some service cost. CTO is saying that the frying charges what ever service cost also should be collect with 14.5% Tax. We fell it is get double taxation one is Packet sold time another one is frying of that item.

Is this correct to doing by the CTO. We are objectiong but he is lister Out wards.

Please resolve as early as possible of the above issue.

AI Summary

Restaurant Owner Challenges 14.5% VAT on Sealed Chicken Packets and Frying Service Under AP VAT Act A restaurant owner is seeking clarification on VAT charges under the AP VAT Act. They purchase sealed chicken packets taxed at 5% VAT, but the Commercial Tax Officer (CTO) insists on a 14.5% tax, arguing that the addition of ingredients creates a new commercial product. Additionally, when customers request the packets to be fried and served in the restaurant, the CTO demands a 14.5% tax on the frying service, which the owner views as double taxation. A respondent suggests explaining to the CTO that VAT applies to goods, not services, and humorously suggests inviting the CTO to the restaurant.