Clarifications on Services Provided by Restaurants
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CA Sushant Maheshwari
There is lot of Confusion regarding Services provided by Restaurants .I would like to clarify regarding certain issues:
Issue No 1 : Is the VAT imposed by States required to be included for the Purpose of Service Tax?
Answer: For the Purpose of Service Tax State VAT has to be excluded from the Taxable Value
Issue No 2: Is the Serving of Food And/or Beverages by way of Room Service liable for Service Tax?
Answer: 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. 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 the part of declared Tarrif.
Please Note, Although In Authors Opinion Service Tax in not chargeable on Food And/or Beverages by way of Room Service but sill department may argue that service tax is chargeable on Food And/or Beverages by way of Room Service as the Government Through Finance Budget 2013 and by way of notification no.3/2013- ST dated 1st March, 2013 substituted the clause as “Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any time during the year”will only be exempt. Here the word establishment is not been defined and it leaves scope for litigation as department may argue that establishment includes all parts of hotel including Restaurant. So even if Rooms Are Air Conditioned and Restaurant was not having Air Conditioner Facility department may demand service tax.
Issue No: 3 Will the other services provided by restaurant in other parts of Hotel such as Swimming Pool etc attached to a restaurant be also liable to Service Tax?
Answer: Any Services provided by a restaurant in other parts of the Hotel attached to a restaurant are also liable for Service Tax as these area also become the extensions of the Restaurant.
Issue No: 4 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 restaurants be also liable to pay Service Tax?
Answer: Service Tax is leviable on the restaurants which satisfy the the following condition:
1) It should have the facility of air conditioning in any part of establishment irrespective of license to serve liquor. Prior to 01.014.2013 Only AC Restaurants having license to serve liquor were liable to service tax.
If within the same entity there are more than one restaurants which are clearly demarcated and separately named the ones satisfying the above condition is only liable to pay service Tax.
(Article is Revised on 31.07.2013.)
Kindly clarify that food or beverages sold in canteen in cinema hall will attract service tax or not.
Even reply of Issue No. 2 is not correct, as Reply is based on classification of Services whereas under the negative list regime classification of service has done away with….
Since the finance budget 2013,the exclusion of exemption is only with respect to levy of service tax on restaurants with AC or central air heating facility, but irrespective of having license to serve liquor or not.
Thank you
N S SANDHYA
Advocate, Bangalore
Hi Sushant Maheshwari,
The Government Through Finance Budget 2013 and by way of notification no.3/2013- ST dated 1st March, 2013 substituted the clause as
“Services provided in relation to serving of food or beverages by a
restaurant, eating joint or a mess, other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any
time during the year’ will only be exempt.
Your article is not considered this amendment,and published on 29-07-2013. As this articles are referred by many CA professional students, professionals and experts, ensure that up dated articles are only written and published in the site.
As per Finance Bill 2013, “licence to serve alcoholic beverages” is not required for the applicability of service tax
A lots of thanks for this article and for all other articles, which update our knowledge on regular basis. However Sir, can you provide us a detailed article on services provided by the Hotels industries and implication of various taxes like Service Tax, VAT, Luxury Tax, TCS and wealth Tax ect imposed upon them…
Effort will highly appreciable…
Thank You..
Sir,
The condition for licence to serve liquor is already done away w.e.f. 01/04/2013.
I request Tax Guru to pl read the article and publish as per lastest provisions of law. Because it may create confusions.
CA Anish Goyal
Still Second condition of ” It Should have license to serve liqueur” for levying of service tax is still in exist ????
article is dt.29 jul 2013. But “licence to serve liquor” condition already deleted w.e.f Apr’ 2013. now only one condition ie. w.r.t air conditioning is applicable for service tax on restaurants.
pl update before posting any info on webpages as it is accesses & used by many
who may be mislead
Thank you very much