Service Tax - Lodging, Boarding, Drinking Tax - CBEC Issues Clarifications
THIS year's Budget saw two new services entering the field:
(zzzzv) to any person, by a restaurant, by whatever name called, having the facility of air-conditioning in any part of the establishment, at any time during the financial year, which has licence to serve alcoholic beverages, in relation to serving of food or beverage, including alcoholic beverages or both, in its premises;
(zzzzw) to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months.
The tax on accommodation is applicable only if the 'declared tariff' is more than Rs. 1000/ per day.
Now the Board clarifies certain queries on these services by potential tax payers.
Temporary Accommodation service:
Query No.1:
What is the relevance of declared tariff? Is the tax required to be paid on declared tariff or actual amount charged?
CBEC Response:
“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/-.
What if the declared tariff is Rs. 900/- and the actual amount collected is Rs 1200? There is no service tax!!!!!
Query No. 2:
Is it possible to levy separate tariff for the same accommodation in respect of corporate/privileged customers and other normal customers?
CBEC Response:
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.
Will Service Tax officers conduct surveys to ascertain how different rates are charged? And what could be the intelligible criterion ?
Query No. 3:
Is the declared tariff supposed to include cost of meals or beverages?
CBEC Response:
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.
Query No. 4
What is the position relating to off-season prices? Will they be considered as declared tariff?
CBEC Response:
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.
Is the Government telling the hotels how they should do business?
A/c Restaurant's service:
Query No. 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?
CBEC Response:
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.
Query No. 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?
CBEC Response:
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.
Query No. 3
Is the serving of food and/or beverages by way of room service liable to service tax?
CBEC Response:
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.
Food when served in Swimming pool is taxable, but not taxable when served in a room. But do they serve food in a swimming pool?
And for both the services, luxury tax and VAT are not to be included in value.
CBEC Circular No. 139/8/2011-TRU, Dated : May 10, 2011