Service Tax on hotels
Hello, Can any one please tell me what is the taxability of service tax on hotel rooms accomadation and if a seperate bill of fooding is not raised for accomadation what rate of service tax will be applicable.
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Firstly have a look at the different provisions:
- Clause (a) to (q) of section 66D specify certain services as non-taxable service. None of the services specified in section 66D relates to services provided by hotel.
- The Notification no. 25/2012-ST, dtd 20/6/2012 grants exemption to services specified in notification. None of the services specified therein relates to services provided by hotel.
From basic reading the notification, we can conclude that all services provided by Hotel are taxable.
In case of providing food along with stay, the entire amount will be taxable. Section 66F (3) provides that if various elements of such services are naturally bundeled in ordinary course of business, it shall be treated as provision of single service which gives essential character to the bundle. In this case Hotel service gives the main character to the bundled service.
In case restaurant services are provided by and seperate bills are raised, Rule 2C of service tax valuation rules 2006 provides that the value of taxable service in case of supply of goods being food or any other article of human consumption shall be 40% of the total amount charged. The total amount has also been defined in the rule. Thus 40% of the total amount charged in case of services provided by restaurent will be considered as a value of taxable service.
However notification 26/2012 dtd 20/6/2012 provides abatement from the gross amount charged in respect of Renting or hotels, inns, guest houses...... meant for residential or lodging purposes. The abatement is 40%. Tax is payable on 60%. However the abatement is optional, incase abatement is used than cenvat credit can not be availed.
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