1. Food Related Services
1.1. Scope
of taxability of services of hotel industry
With effect from 1st
April, 2013, tax will be levied on following part of amount of services
provided by hotel industry:
Reference of
section / Rule/ Notification
|
Description of
taxable
service |
Tax to be levied on percentage of taxable value
|
Conditions
|
Entry no. 19 of Mega exemption notification 25/2012-ST, 20th
June, 2013 r.w. Finance act, 2013
|
Services provided in relation to serving of food or beverages by a
restaurant (big or small), eating joint or a mess, other than those
having the facility of air-conditioning
|
NIL
|
Such restaurant
should not have facility of air-conditioning or air heating and license to
serve alcoholic beverages
|
Rule 2C of Service tax (Determination of value) Rules, 2006
|
Services provided in relation to serving of food or beverages by a
restaurant (big or small), eating joint or a mess, having the facility of air-conditioning
or central air heating in any part of the establishment, at any time
during the year
|
40
|
(i)
CENVAT credit on any goods classifiable under
Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) used for
providing the taxable service, has not been taken under the provisions of the
CENVAT Credit Rules, 2004.
(ii)
Availability of Cenvat
credit on other inputs, input services and capital goods would be subject to
the provisions of the Cenvat Credit Rules, 2004
|
Rule 2C of Service tax (Determination of value) Rules, 2006
|
Services provided in relation to serving of food or any other article
of human consumption or any drink(whether or not intoxicating) is supplied in
any manner as a part of such outdoor catering
|
60
|
Same
as above
|
Notification no.
26/2012-ST, dated 20th June, 2012
|
Bundled service by way of supply of food or any
other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal,
shamiana or any other place, specially arranged for organizing a function) together with renting of such premises
|
70
|
Same
as above
|
Notification no.
26/2012-ST, dated 20th June, 2012
|
Renting of
hotels, inns, guest houses, clubs, campsites or other commercial places meant
for residential or lodging purposes having declared tariff of a unit of accommodation above rupees one thousand
per day or equivalent
|
60
|
Same
as above
|
Entry no. 18 of Mega exemption notification 25/2012-ST, 20th
June, 2013
|
Services by way
of renting of a hotel, inn, guest house, club, campsite or other commercial
places meant for residential or lodging purposes, having declared tariff of a
unit of accommodation below rupees one
thousand per day or equivalent
|
NIL
|
Declared tariff
of a unit of accommodation should be below rupees one thousand per day or
equivalent
|
Section 66 B of
finance act, 1994 – charge of service tax
|
Laundry Services
(i.e. ‘Dry cleaning’ as well as ‘wet cleaning’) , Telephone services, No Show
charges, cancellation charges, etc.
|
100%
|
Can avail input
credit as per the provisions of the
Cenvat Credit Rules, 2004
|
Section 66 B of finance
act, 1994 – charge of service tax
|
Sale of
space/time for advertisement other than by radio/television broadcast
|
100%
|
Can avail input
credit as per the provisions of the
Cenvat Credit Rules, 2004
|
1.2. Clarifications
from CBEC
CBEC
has vide circular no. 139/8/2011-TRU dated 10.5.2011 clarified on taxation and
valuation of restaurant services as follows:
Q:
If there are more than one restaurants belonging to the same entity in a
complex, out of which only one or more satisfy the criteria relating to
air-conditioning, will the other restaurant(s) be also liable to pay Service
Tax?
A:
If there is more than one restaurant, which are clearly demarcated and
separately named, the ones which satisfy criteria relating to air-conditioning
is only liable to service tax.
Q:
Will the services provided by taxable restaurant in other parts of the hotel
e.g. swimming pool, or an open area attached to a restaurant be also liable to
Service Tax?
A:
The taxable services provided by a restaurant in other parts of the hotel e.g.
swimming pool, or an open area attached to the restaurant are also liable to
Service Tax as these areas become extensions of the restaurant.
Q:
Is the value added tax imposed by States required to be included for the
purpose of service tax?
A:
For the purpose of service tax, State Value Added Tax (VAT) has to be excluded
from the taxable value.
· CBEC has vide letter no. DOF
334/3/2011-TRU dated 28.2.2011 clarified that it is not necessary that the
facility of air-conditioning is available round the year. If the facility is
available at any time during the financial year the conditions for the levy
shall be met.
CBEC circular no. 139/8/2011 TRU
dated 10-5-2011 - Service tax is not payable on VAT charged by restaurant.
Service tax is not payable on luxury tax charged by hotel on short term
accommodation service.
·
CBEC has vide letter no.
334/3/2011-TRU dated 25.4.2011 clarified as follows:
An
exemption @ 70% of the gross value i.e. the total price charged by the
restaurant is available provided no Cenvat credit is availed either of inputs
or input services. It is clarified that the exemption is available on the gross
price charged by the restaurant for the taxable service, including any portion
shown separately e.g. service charge. However the amount paid by the customer
ex-gratia e.g. as tip to any member of the staff doesn’t constitute
consideration paid to the restaurant and shall remain outside this levy.
1.3. Judgment
Service charge by hotels: In
Hotel Mela Plaza v. CCE (2005) 1 STT 204 (CESTAT), assessee was charging 10%
‘service charge’ which was later distributed as tips to employees. It was held
that tax is payable on gross amount charged to customer and hence would include
such ‘Service charge’ also for service tax.
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