CA Srikant Agarwal
All of us use the services of Hotels and restaurant for stay, meetings, party, get together etc. It is generally been observed that the ultimate payment made by us is much higher than the prices mentioned on the menu list or tariff charts. The difference arises because of 4 major heads:
1) Service Charges
2) Luxury tax
3) VAT (Value added Tax) and
4) Service tax
In this article we will discuss in detail about each head separately.
1) Service Charges
Generally service charges are applied in case of restaurant or hotel food bill (and not on stay charges i.e room rent). It is a non-statutory charge. Many a time this service charges is assumed to be as part of service tax which is not so. Service charges is a kind of tip which is charged by the restaurant or hotel and it normally ranges from 0% to 10% (In some cases it may be even higher and is purely discretionary on the part of service provider).
The service tax and VAT is applicable on service charges as well.
2) Luxury tax
It is applicable on stay charges (i.e Room Rent) and is not applicable on food charges.
Luxury tax is statutory in nature and is applied by the different states on the stay charges (i.e Room Rent). It varies from state to state. The Luxury tax rate for some of the states are as below:
| Per Day room Rent | Maharashtra | Per Day room Rent | Delhi | |
| < = Rs 1000 | Nil | < Rs 750 | Nil | |
| > Rs 1000 but < = Rs 1500 | 4% | > = Rs 750 but < Rs 1000 | 3% | |
| > Rs 1500 | 10% | > = Rs 1000 | 10% | |
| Per Day room Rent | Assam | Per Day room Rent | GOA | |
| < Rs 1000 | Nil | < = Rs 500 | Nil | |
| > = Rs 1000 but < Rs 1999 | 5% | > Rs 500 but < = Rs 2000 | 5% | |
| > = Rs 1999 but < Rs 2999 | 8% | > Rs 2000 but < = Rs 5000 | 8% | |
| > = Rs 2999 | 12% | > Rs 5000 | 12% | |
It may be notes that no service tax is levied on Luxury tax.
3) VAT (Value Added Tax)
VAT is generally applicable on restaurant or food bills. However sometime it is also applied on room rent by showing the food portion separately.
The rate of VAT again varies from state to state and is applicable on the whole value of the food bill (including service charges if any).
VAT on Hotel Room Rent
Many a time hotels use to provide complimentary breakfast or meal and do not charge for it separately and it forms part of room tariff. In such a case some of the hotels at the time of billing to customer use to show the charges towards the complimentary food and charge VAT on that food portion of the bill separately. It has the impact of reducing the charges towards stay charges and accordingly luxury tax get reduced.
This can be shown with an example:
Say the tariff charge in a Hotel is Rs 6000 (with complimentary breakfast). In such a situation the billing may be made in two ways:
| Particulars | Case 1 | Case 2 |
| Stay Charges | 6,000 | 5,200 |
| Meal Charges | – | 800 |
| Add: VAT say @ 14.50% on meal charges | – | 116 |
| Add: Luxury tax say @ 10% on stay charges | 600 | 520 |
| Add: Service Tax @ 8.40% (i.e 60% of 14%) ** | 504 | 504 |
| Total | 7,104 | 7,140 |
** Service Tax part discussed in detail in the next section in detail.
VAT on Food Bill
VAT is applicable on the food bill of the restaurant or hotel as per the rate prescribed by the respective state. Here the VAT applies on the full value of food charges including the service charges (if any).
4) Service Tax
Prior to applicability of negative list of services w.e.f 01.07.2012 (i.e all the services are taxable except those mentioned in the negative list) the taxability of Hotel, food and drinks charges was covered by 3 specified services
1) Outdoor catering (Sec 65(105)(zzt) (w.e.f 10.09.2004 and effective upto 30.06.2012)
2) Restaurant services (Sec 65(105)(zzzzv) (w.e.f 01.05.2011 and effective upto 30.06.2012)
3) Hotel accommodation under (Sec 65(105) (zzzzw) (w.e.f 01.05.2011 and effective upto 30.06.2012)
The service tax applicability and the valuation of service can be illustrated with the help of below table:
Service Tax Applicability:
| Particulars | Prior to 01.07.2012 | Post 01.07.2012 to 31.03.2013 | Post 01.04.2013 |
| Taxability of Food supplied in Restaurants serving liquor and being Air conditioned | Taxable | ||
| Taxability of Food supplied in Restaurants being Air conditioned only | Not Taxable | Taxable | |
| Accommodation in a Hotel for declared tariff of more than Rs 1,000/- per day | Taxable for period for less than continuous three months | Taxable without any exclusion of period | |
| Mandap Keepers’ Service, Outdoor catering Service | Taxable | ||
| Laundry Services (i.e. ‘Dry cleaning’ as well as ‘wet cleaning’) , Telephone services, No Show charges, cancellation charges, etc. | Not taxable unless specifically defined | Taxable in view of the expanded definition of services and applicability of negative list | |
Taxable portion of Value of service
| Particulars | Prior to 01.07.2012 | Post 01.07.2012 to 31.03.2013 | Post 01.04.2013 |
| Accommodation in a Hotel for declared tariff of more than Rs 1,000/- per day | Taxable Value : 50% | Taxable Value : 60% | Taxable Value : 60% |
| Food and drink supplied in Restaurants serving liquor and being Air conditioned | Taxable Value : 30% | Taxable Value : 40% | Taxable Value : 40% |
| Food and drink supplied in Restaurants being Air conditioned only | Not taxable | Not taxable | Taxable Value : 40% |
| Food and drink supplied in outdoor catering | Taxable Value : 50% | Taxable Value : 60% | Taxable Value : 60% |
| Food and drink supplied in Other services like convention, pandal, shamiana etc | Taxable Value : 60% | Taxable Value : 70% | Taxable Value : 70% |
The applicability of all the above 4 components can be shown with below example:
Eg 1 ) X Ltd organizes a dealer meeting at Taj Hotel which includes stay for night as well.
The Hotel offered below rates:
| S.N | Particulars | Am Rs |
| 1 | Room Rent for 20 participant with complimentary breakfast | 120,000 |
| 2 | Conference room Charges | 100,000 |
| 3 | Lunch food charges | 80,000 |
| 4 | Audio visual arrangement | 20,000 |
| 5 | Evening function (Food and Drinks) (Shamiana) charges | 150,000 |
| 6 | Service Charges @ 8% on Lunch and evening function | |
| 7 | Taxes Extra | As Applicable |
Say rate of Luxury Tax is 10%, VAT is 14.50% and service tax rate is 14%.
Then the total billing will be as below:
For Room rent the billing can be done in following 2 ways:
| Without considering the value for complimentary breakfast | ||
| S.N | Particulars | Am Rs |
| 1 | Room Rent for 20 participant with complimentary breakfast | 120,000 |
| Add: Luxury Tax @ 10% | 12,000 | |
| Add: Service Tax @ 8.40% (i.e 60% of 14%) | 10,080 | |
| Total | 142,080 | |
–
| After considering the value for complimentary breakfast | ||
| S.N | Particulars | Am Rs |
| 1 | Room Rent for 20 participant with complimentary breakfast | 108,000 |
| Complimentary Breakfast @ 600 per head | 12,000 | |
| Add: VAT @ 14.5% | 1,740 | |
| Add: Luxury Tax @ 10% | 10,800 | |
| Add: Service Tax @ 8.40% (i.e 60% of 14%) | 10,080 | |
| Total | 142,620 | |
–
| S.N | Particulars | Am Rs |
| 2 | Conference room Charges | 100,000 |
| Add: Service Tax @ 8.40% (i.e 60% of 14%) | 8,400 | |
| Total | 108,400 |
–
| S.N | Particulars | Am Rs |
| 3 | Lunch food charges | 80,000 |
| Add: Service Charges @ 8% | 6,400 | |
| 86,400 | ||
| Add: VAT @ 14.5% | 12,528 | |
| Add: Service Tax @ 5.60% (i.e 40% of 14%) | 4,838 | |
| Total | 103,766 |
–
| S.N | Particulars | Am Rs |
| 4 | Audio visual arrangement | 20,000 |
| Add: Service Tax @ 14% | 2,800 | |
| Total | 22,800 |
–
| S.N | Particulars | Am Rs |
| 5 | Evening function (Food and Drinks) (Shamiana) charges | 150,000 |
| Add: Service Charges @ 8% | 12,000 | |
| 162,000 | ||
| Add: VAT @ 14.5% | 23,490 | |
| Add: Service Tax @ 9.80% (i.e 70% of 14%) | 15,876 | |
| Total | 201,366 |
Hence from the above example we can see that a substantial portion of the bill goes on account of service charges, Luxury tax, VAT and service tax.
However in case of take away from restaurants service tax is not applicable since no element of service is involved and it’s a purchase and sale transaction.
Similarly in case of home delivery of food no service tax is applicable provided nothing is charged in the name of delivery charges. If anything is charged on account of delivery charges then service tax will apply on delivery charge portion only.
Author Bio
Sir ,
Shall i presume from ur article that, no Vat is need to be collected in the case of complimentary foods supplied by lodging houses?
Sir,
Tell me water bottle VAT applicable in restaurant ?
Pl.confirm the luxury tax rate for f.y.2015-16 in uttarakhand
What is the Luxury Tax on Single occupancy in Double Room. Room Tariff notified seperately for Double Occupancy and Single Occupancy.
Dear Sir
This is regarding Service Tax liability on Room Services provided in a hotel like supply of food and liquor in rooms.
1. As per the CBEC’S Circular NO. 139/8/2011-TRU, DATED 10-5-2011 Room service provided in a hotel room is neither Restaurant service nor Hotel Accomodation service. that is why it was not taxable prior to 01.07.2012.
2. After 01.07.2012 it is a Taxable service and is also specified as declared service under Sec.66E entry no. 09.
3. As per Rule 2C of Valuation Rules 60% abatement is to be given on restaurant service and 40% abatement is to be given on outdoor catering services. (this speaks specificaly about restaurant)
Now the question is whether the room service be given abatement or not.
If yes then 60% or 40%?
Please clarify
Thanks and regards
Hi sir I am RamanRamnath from Hotel Maniam classic.reg.service tax is applicable for room service are not.Its middle class hotel v do good service for other out let v have paid tax but v have not collected for the room service only pls. give me some help thank you sir.
i want to know service tax for a service villa in wayanad dist. kerala. rate is 13,000. any other taxex applicable for service villas?
Luxury tax and service tax applicable on Hotel room Maintenance charges ?
what is the GST for wedding halls without food
my brother has running function hall (without A/C) he is doing 20 functions with food in a month whether the service tax applicable or not what is the percentage.? from which date it will be affected
Dear Sir
I have a doubt that Lets Take for a Example
My company has hotel
My company is registered with service tax for wide ranges of services.
Is it possible for me to take abatemnt for one service and for the other one i do not opt for abatement.
dear sir,
what the luxury tax rate for hotels and lodging in andhra pradesh after gst
KIndly clear minimum applicability amount of Luxury Tax in Haryana State?
Some professional are says minimum amount Rs. 2000 reduce form 24.9.2016.
Any amount of the hotel room than charges Luxury Tax in Haryana
dear readers .. i want to know whether service tax applicability for total amount of sale of a lodging hotel (with no restaurant) and out of total 27 rooms only 12 rooms are ac with room tariff above rs 1000/- . will in this case total sale of 27 rooms will be counted or sale from only ac rooms will be counted for exceeding limit 9 lacs for service tax registration ??????? kindly help
Whether Director of the Hotel has to be charged Luxury Tax in Chennai, where the room rate is on the Published tariff and the room is on Complimentary basis.
DEAR SIR PLEASE CLARIFY ME THE SERVICE TAX , VAT AND LUXURY TAX IN A HOTEL WITH RESTAURANT.
Dear Sir,
1.Can take input credit on service tax paid to Hotel Building Rent to Building owner?
2.We are paying service tax on 60% value of accommodation charges after abatement.
3. What is the service tax payable to building owner on renting of immovable property services?
Dear Sir,
1.Can we take Input service tax on Rent paid to hotel Building owner?
2.We are paying service tax on abated value of 60% of Accommodation charges?
3. What is the service tax rate of rent payable to hotel building owner? is he get any abatement on Renting of immovable property service?
Sir,
In case a restaurant serves food in AC room attached will the service tax be applicable for AC room food items only or on all the food items including Non- AC rooms also.
In the example given you have calculated (for Lunch food and evening food )VAT @ 14.50% on amount including Service charges. Should it not be calculated on food only. That is, Is VAT on 8% Service charges applicable
sir i m provided in hotel room laundry,internet,taxi so applicable in luxury tax
Please clarify whether Luxury Tax is to be calculated on the total room rent i.e inclusive of all taxes or on the net amount of the room rent only.
Suppose we have given a discount on the room rent should we calculate the Luxury tax after discount or before showing the discount.
I bought a Ciaz Zdi+ from Maruti on 1st July. Later I came to know Dealer would be charging another 1% as Luxury Tax on the Car per new norms. As per this invoice (Details attached) do I need to pay Luxury Tax as well, if Yes how Much ??
I want to know the luxury tax is calculated on on Road Price or Ex Showroom Price or Accessible Value as per invoice generated in which VAT is calculated after reducing all Discounts given by Dealer, will luxury tax will also be calculated on same amount on which VAT was calculated.
Here was the computation in Invoice as per Dealer :
Cost of One ciaz Zdi+ – 9,10,578 (Dr)
Discount – 13,043 (Cr)
Loyalty Bonus Discount – 30,434 (Cr)
Accessible Value – 8,67,100
VAT @ 15% – 1,30,165
Total Amount (Accesable Value + Tax) – 9,97,165
What should be rate of service tax on food served in hotel room
Iam running hotel in Agra if I charge 999 for room rent which tax is applicable and above 1000
is complementary service like laundry taxable or not
Respected sir, can you explain about the taxes applicable for hotels in surat as on date please.
I am still NOT sure how to decode the Bill. For Eg
Total bill is Rs 3000/- Food Rs 2000/- Liquor Rs 1000/-
Food Bill-
40% is Service Component, So Service Tax is 5.6% of 2000/- ie Rs 112/-
Balance 60% is Food component I am NOT CLEAR whether VAT is on total food bill of Rs 2000/- or on Balance (Product) component of 60% Rs 1200/-
Liquor Bill-
Same as Above. 40% Service and 60% product component applicable. However, is VAT applicable on bottled products as no Value is added by the restaurant.
Kindly clarify the Service tax abatement on Room service & Renting of immovable property
Please let me know that is 3% luxury tax in hotels will be calculated on original tariif or discounted tariff??
Respected Sir/ Ma’am
Please let me know that can we charge VAT Tax without charging Service Tax.
Please clarify service tax on Room Service.
Kindly clarify the charges in case of TAKE AWAY?