Clarification on Service tax on Short Term Accommodation and
Restaurant Services
Subject:
Short Term Accommodation Service and Restaurant Service- clarification
[Ref: Service Tax Circular No. 139/8/2011-TRU dated
10 May 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 of declared tariff? Is the tax required to be paid on declared
tariff or actual amount charged? |
“Declared tariff”
includes charges for all amenities provided in the unit of accommodation like
furniture, air-conditioner, refrigerators etc., but does not include any
discount offered on the published charges for such unit. The relevance of
‘declared tariff’ is in determining the liability to pay service tax as far
as short term accommodation is concerned. However, the actual tax will be
liable to be paid on the amount charged i.e. declared tariff minus any
discount offered. Thus if the declared tariff is Rs 1100/-, but actual room
rent charged is Rs 800/-, tax will be required to be paid @ 5% on Rs 800/-. |
|
2. |
Is it possible to
levy separate tariff for the same accommodation in respect of
corporate/privileged customers and other normal customers? |
It is possible to
levy separate tariff for the same accommodation in respect of a class of
customers which can be recognized as a distinct class on an intelligible
criterion. However, it is not applicable for a single or few corporate
entities. |
|
3. |
Is the declared
tariff supposed to include cost of meals or beverages? |
Where the declared
tariff includes the cost of food or beverages, Service Tax will be charged on
the total value of declared tariff. But where the bill is separately raised
for food or beverages, and the amount is charged in the bill, such amount is
not considered as part of declared tariff. |
|
4. |
What is the
position relating to off-season prices? Will they be considered as declared
tariff? |
When the declared
tariff is revised as per the tourist season, the liability to pay Service Tax
shall be only on the declared tariff for the accommodation where the
published/printed tariff is above Rupees 1000/-. However, the revision in
tariff should be made uniformly applicable to all customers and declared when
such change takes place. |
|
5. |
Is the luxury tax
imposed by States required to be included for the purpose of determining
either the declared tariff or the actual room rent? |
For the purpose of
service tax luxury tax has to be excluded from the taxable value. |
Services
Provided by Restaurants:
|
1. |
If there are more
than one restaurants belonging to the same entity in a complex, out of which
only one or more satisfy both the criteria relating to air-conditioning and
licence to serve liquor, will the other restaurant(s) be also liable to pay
Service Tax? |
Service Tax is
leviable on the service provide by a restaurant which satisfies two
conditions: (i) it should have the facility of air conditioning in any part
of the establishment and (ii) it should have
license to serve alcoholic beverages. Within the same entity, if there
are more than one restaurant, which are clearly demarcated and separately
named, the ones which satisfy both the criteria is only liable to service
tax. |
|
2. |
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? |
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. |
|
3. |
Is the serving of
food and/or beverages by way of room service liable to service tax? |
When the food is
served in the room, service tax cannot be charged under the restaurant
service as the service is not provided in the premises of the air-conditioned
restaurant with a licence to serve liquor. Also, the same cannot be charged
under the Short Term Accommodation head if the bill for the food will be
raised separately and it does not form part of the declared tariff. |
|
4. |
Is the value added
tax imposed by States required to be included for the purpose of service tax? |
For the purpose of
service tax, State Value Added Tax (VAT) has to be excluded from the taxable
value. |
3. Trade Notice/Public Notice may be issued to
the field formations and taxpayers.
4. Please acknowledge receipt of this Circular.
Hindi version follows.
F.No.334/81/2011-TRU