A sigh of relief - Service Tax on Renting of Hotels, Inns etc
THE primary objective of the Regional Connectivity Scheme (RCS) of the Ministry of Civil Aviation is to facilitate/stimulate regional air connectivity by making it affordable. As per the Scheme, an all-inclusive airfare not exceeding Rs.2,500/- per RCS Seat will be applicable.
In DDT 2962, while highlighting the collateral damage caused while granting Service Tax largesse to the aforesaid endeavour of the government - UDAN - "Ude Deshka Aam Nagrik", we had mentioned - While granting exemption to air passengers, CBEC by mistake withdraws Cenvat credit on input services for renting of hotels.
What had actually happened is best explained by extracting the following table.
Kindly Note - In between the entries 5 and 6 to the notification , an entry 5A was inserted by the amending notification dated 30.08.2016 resulting in the following -
Sl.No. | Description of taxable service | Percentage | Conditions |
|---|---|---|---|
(1) | (2) | (3) | (4) |
5 | Transport of passengers by air, with or without accompanied belongings in (i) economy class (ii) other than economy class | 40 60 | CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. |
5A. | Transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport. | 10 | CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004. |
6 | Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. | 60 | Same as above |
Inasmuch as whereas the condition attached to serial no. 6 above prior to insertion of Serial no. 5A was non-availment of CENVAT credit on Inputs and Capital goods, consequent upon the insertion of Serial no. 5A the condition has enlarged itself to mandate non-availment of CENVAT credit on Inputs, Capital Goods and Input Services.
DDT also said -
+ Even before the Aam Nagrik has taken to the skies, the hospitality sector is already in the pit!
+ Hopefully, the CBEC realises this gaffe and extinguishes the flames before they spread far and wide.
Our sincere plea has been accepted by the responsive CBEC and that too within a week.
Yesterday, a corrigendum was issued to the notification and which does the following -
(i) in line 23, for "5" read "6";?
(ii) in the TABLE, in column 1, for "5A" read "6A";?
(iii) in line 31, for "5A of the TABLE" read "6A of the TABLE".
And so, the flames have been put out without any apparent loss to life or property.
DDT is ever-so-thankful to the Board. But should notifications be so complicated? And the corrigendum more complicated. Now who will understand where this line 23 is?