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CA Pradeep Jain, Ranu Dhoot

With the coming up of new government led by Mr. Naredndra Modi, came new hopes. The hopes for a better India once again dawned in the hearts of the people. The much talked about Budget of 2014 was the ray of hope for the people. The budget brought in a several boons if not many for different sectors in the country. One such gift budget brought along was some extent of clarification regarding different provisions of taxations. One such clarification brought about is the ambiguous Sl. 18 of mega exemption. But amendment in this regard has created ambiguity.


The upcoming of Mega Exemption vide Notification No. 25/2012-ST, dated 20.06.2012 brought relief to several services listed in the aforesaid notification.

It brought a sigh of relief for the small guest house or hotel owners. The Serial No. exempting such service reads as under:

“18. Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;”

With the upcoming of the relief came up the point of confusion. The confusion was on account of use of the word “commercial” in the entry as to whether dharamshalas, ashram or any such entity which offer accommodation would be covered therein. These run on non commercial basis. These are run normally by trusts who do not have profit motive.

But we have seen in case of “Commercial coaching” service wherein it was clarified by then finance minister that “commercial” does not have any link with the profit motive. Even if trust is charging some nominal amount from the students will have to pay the tax. Although courts have different stand but the litigant department started issuing show cause notice to all the assessee.


The perplexity of the interpreter on account of use of word “commercial” has been brought to end by the amendment brought in the Budget of 2014, Vide Notification No.06/2014 – Service Tax dated 11th July, 2014, the enrty 18 has been substituted by the following

“18. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent;”

The new definition no more contains the word “commercial”. Hence, there will not be any dispute on this score. Thus, all the trusts who are running on non commercial basis will be covered by this amendment.

However, this is seen that all these non commercial units like dharmshala will not be offering room rent of more than Rs. 1000/-. Hence, they will not be still covered under the ambit of service tax. Moreover, the threshold exemption of Rs. 10 Laksh still be available to any entity providing service by the way of accommodation.

Conclusion: To remove any ambiguity in Serial No. 18 of Mega Exemption the word “commercial” has been omitted, thus providing a clear view of applicability of such exemption on non commercial trusts providing service by the way of accommodation. Despite the fact that the ambit of Sl No. 18 of mega exemption has been widened covering in it dharamshalas, ashrams etc., such clarification does not hold much relevance.

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June 2024