8/6/2019 Service Tax Clarification as on 10.5.11 by CBEC

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CBEC'S CLARIFICATION REGARDING SERVICE TAX ON HOTELS/RESTAURANTS

Clarification regarding service tax on Short Term Accommodation Service and Restaurant

Service

CIRCULAR NO. 139/8/2011-TRU, DATED 10-5-2011

Since the levy of service tax on the two new services relating to services provided by

specified restaurants and by way of short-term hotel accommodation came into force with

effect from 1st May 2011, a number of queries have been raised by the potential tax

payers.

2.These are addressed as follows:

Short Term Accommodation Service:-

Sl.No

Queries Clarification

1. What is the relevance ofdeclared tariff? Is the taxrequired to be paid ondeclared tariff or actualamount charged?

Declared tariff includes charges for allamenities provided in the unit ofaccommodation like furniture, air-conditioner, refrigerators etc., but doesnot include any discount offered on thepublished charges for such unit. The

relevance of declared tariff is indetermining the liability to pay servicetax as far as short term accommodationis concerned. However, the actual taxwill be liable to be paid on the amountcharged i.e. declared tariff minus anydiscount offered. Thus if the declaredtariff is Rs 1100/-, but actual room rentcharged is Rs 800/-, tax will be requiredto be paid @ 5% on Rs 800/-.

2. Is it possible to levy separatetariff for the sameaccommodation in respect ofcorporate/privilegedcustomers and other normalcustomers?

It is possible to levy separate tariff forthe same accommodation in respect ofa class of customers which can berecognized as a distinct class on anintelligible criterion. However, it is notapplicable for a single or few corporateentities.

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3. Is the declared tariffsupposed to include cost ofmeals or beverages?

Where the declared tariff includes thecost of food or beverages, Service Taxwill be charged on the total value ofdeclared tariff. But where the bill isseparately raised for food or beverages,

and the amount is charged in the bill,such amount is not considered as partof declared tariff.

4. What is the position relatingto off-season prices? Willthey be considered asdeclared tariff?

When the declared tariff is revised asper the tourist season, the liability to payService Tax shall be only on thedeclared tariff for the accommodationwhere the published/printed tariff isabove Rupees 1000/-. However, therevision in tariff should be made

uniformly applicable to all customersand declared when such change takesplace.

5. Is the luxury tax imposed byStates required to beincluded for the purpose ofdetermining either thedeclared tariff or the actualroom rent?

For the purpose of service tax luxurytax has to be excluded from the taxablevalue.

Services Provided by Restaurants:

1. If there are more than onerestaurants belonging to the sameentity in a complex, out of whichonly one or more satisfy both thecriteria relating to air-conditioningand licence to serve liquor, will theother restaurant(s) be also liableto pay Service Tax?

Service Tax is leviable on the serviceprovide by a restaurant which satisfiestwo conditions: (i) it should have thefacility of air conditioning in any part ofthe establishment and (ii) it shouldhave license to serve alcoholicbeverages. Within the same entity, ifthere are more than one restaurant,which are clearly demarcated andseparately named, the ones which

satisfy both the criteria is only liable toservice tax.

2. Will the services provided bytaxable restaurant in other parts ofthe hotel e.g. swimming pool, oran open area attached to arestaurant be also liable to ServiceTax?

The taxable services provided by arestaurant in other parts of the hotel e.g.swimming pool, or an open areaattached to the restaurant are also liableto Service Tax as these areas becomeextensions of the restaurant.

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3. Is the serving of food and/orbeverages by way of room serviceliable to service tax?

When the food is served in the room,service tax cannot be charged under therestaurant service as the service is notprovided in the premises of the air-conditioned restaurant with a licence to

serve liquor. Also, the same cannot becharged under the Short TermAccommodation head if the bill for thefood will be raised separately and itdoes not form part of the declared tariff.

4. Is the value added tax imposed byStates required to be included forthe purpose of service tax?

For the purpose of service tax, StateValue Added Tax (VAT) has to beexcluded from the taxable value.

Trade Notice/Public Notice may be issued to the field formations and taxpayers.

CBEC'S CLARIFICATION REGARDING SERVICE TAX ON HOTELS/RESTAURANTS

Clarification regarding service tax on Short Term Accommodation Service and RestaurantService