EXPENDITURE TAX ACT, 1987
SECTION 2(10) – ROOM CHARGES
Clarification on applicability of the Expenditure Tax Act, 1987
1. Provisions of the Expenditure-tax Act apply in relation to any chargeable expenditure incurred in a hotel wherein the room charges for any unit of residential accommodation at the time of incurring of such expenditure are Rs. 1,200 or more per day per individual. (Up to 1-6-1992, the Act was applicable to chargeable expenditure incurred in a hotel having room charges at Rs. 400 or more per day per individual).Online GST Certification Course by TaxGuru & MSME- Click here to Join
2. The computation of room charges is used for the determination of applicability of the Expenditure-tax Act to any particular hotel.
3. The Board has received several petitions from Hotel Associations requesting for a clarification whether luxury tax charged by State Governments is to be included in the computation of room charges within the meaning of section 2(10) of the Expenditure-tax Act.
4. It is clarified that luxury tax and such other taxes levied by the State Governments will form part of the ‘room charges’ as the customer is required to pay these taxes to the hotel.
5. To illustrate, if a hotel is charging room rent @ Rs. 1,150 per day per individual and luxury tax @ 7 per cent of the room rent, the ‘room charges’ as per section 2(10) of the Expenditure-tax Act will exceed Rs. 1,200 per day per individual, making the hotel liable to collect and pay the expenditure-tax.
6. Although the luxury tax forms part of the ‘room charges’, it will not be considered as a part of the chargeable expenditure for the purpose of section 5 of the Expenditure-tax Act.
Circular : No. 645, dated 15-3-1993.