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Finance Bill, 2014 enacted into Finance Act, 2014, Date of Enactment 06.08.2014Budget 2014-15 : Sale of space for advertising has been made taxable except for print media.Budget 2014-15 : Radio Taxis are now taxable.Budget 2014-15 : Education : The definition of Auxiliary Education Services has been scraped.Budget 2014-15 : Works Contract : 2 slab rates prescribed in place of earlier 3 slabs.Budget 2014-15 : E-payment of Service tax is being made mandatory with effect from 01.10.2014.Budget 2014-15 : POPS: Definition of intermediary is being amended to include the intermediary of goods in its scope.

Hotel Accommodation Service [Sec 65(105)(zzzzw)]
Effective upto 30th June, 2012
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INTRODUCED: With Effect From 1th May 2011
 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Accounting Code
Service Tax 00441070
Interest  00441071
Penalty 00441479
 
DEFINITION

According to Section 65 (105) (zzzzw) taxable service means any service provided or to be provided to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months;

 
SCOPE:
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1. Who will be covered under Service Tax?

Hotels, inns, guesthouses, clubs, campsites, etc. are covered under this levy.

2. From which date service tax would be levied on services provided by Hotels?
Accommodation provided by hotel would be taxable with effect from 01.05.2011 (Notification 29/2011, dated 25.04.2011)

3. What is taxable service?

According to Section 65 (105) (zzzzw) taxable service means - service provided or to be provided to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months;

4. What if accommodation is for a continuous period of more than 3 months?

In a case where accommodation is for the period of continuously more than 3 months, it is specifically excluded from the definition of taxable service. Therefore, no service tax will be levied.

5. What if accommodation is for more than 3 months in a year but not for continuous period?

In a case where accommodation is for more than 3 months but not for continuously period of 3 months, it will be taxable under Service Tax, as only, ‘continuous three months’ is excluded from service tax.

6. Are all hotels, inns, etc. are covered?

Hotels, inns, etc., having their declared tariff of less then Rs.1,000/- per day are exempted from this service. (Notification No. 31/2011–S.T., dated 25.04.2011)

7. What if declared tariff is exactly Rs.1,000/-?

Such hotels would be covered under Service Tax, as the exemption is for assessee having declared tariff of less than Rs.1,000/-.

8. What is the meaning of ‘Declared Tariff’?

“Declared tariff” includes charges for all amenities provided in the unit of accommodation like furniture, air-conditioner, refrigerators etc., but does not include any discount offered on the published charges for such unit. (Notification No. 31/2011-S.T., dated 25.04.2011)

9. What if hotel’s Tariff is of less than Rs.1,000/- as well as more than Rs.1,000/-?

No clarification is provided by government. According to the plain reading of law, if the room tariff is less than Rs.1,000/- then service tax should not be charged. Simultaneously for rooms having tariff of Rs.1,000/- or more, service tax must be charged.

10. What if Tariff is less than Rs.1,000/- but after charging for ‘extra bed’ the accommodation charge is more than Rs.1,000/-?

Cost of extra bed will not form a part of the declared tariff. Therefore in such a case Service Tax need not be charged.

11. What if Tariff is Rs.1,000/- or more but off season discount is given or lesser amount is charged to customer?

Once Tariff price is Rs.1,000/- or more, tax will be levied. Service Tax will be chargeable irrespective of the fact that actually the amount charged from a particular customer is less than Rs.1,000/-

(D.O. F. No. 334/3/2011-TRU, dated 28.02.2011)

12. Once service tax is made applicable, will it be restricted to accommodation? What about Room-Service / Laundry bills?

The D.O. Letter clarifies that once the tax is levied, it will be charged on the gross amount paid or payable. Declared tariff has been defined within the notification as charges for all amenities provided in the unit of accommodation. Thus, it will include cost of all electronic gadgets installed in the room and any other facility normally provided by a hotel as part of the stay. Accordingly room-service / laundry bills etc. should be included for Service Tax.

13. What about complimentary break-fast?

No exclusions are provided from the declared tariff e.g. on account of breakfast or any other meal whose cost is included in the declared tariff including any discount given to the customer.

14. What is the EFFECTIVE rate of Service Tax?

The normal rate is 10.3%, (Including Education Cess). If assessee opts to go for such rate than he has to charge 10.3% Service Tax on taxable value. But credit can be claimed for input / input service / capital goods in accordance with Cenvat Credit Rules, 2004.

15. What is other alternative option?

A suitable exemption of 50% has been provided if Cenvat Credit is not availed. Thus, in that case effective rate would be 5.15%. The government has provided for such exemption by amending the Notification No. 1/2006-S.T., dated 01.03.2006 vide Notification No. 34/2011-S.T., dated April 25, 2011.

 
SERVICE TAX EXEMPTIONS:
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(a) Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/- (Service Tax Notification No. 08/2008-S.T., dated 01.03.2008)

(b) Services provided to the United Nations or International Organisations

(c) Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d) Services which are exported as per ‘Export of Services’ Rules

(e) Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f) Services provided by Reserve Bank of India

(g) Out of total value of service provided proportionate value of goods and material provided by the Service Provider

 
 
RELEVANT SERVICE TAX NOTIFICATIONS:
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Service Tax Notification No. 34/2011-S.T., dated 25-04-2011

Service Tax Notification No. 31/2011-S.T., dated 25-04-2011

Service Tax Notification No. 29/2011-S.T., dated 25-04-2011

 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:

Service Tax CBEC Instruction Letter D.O. F. No. 334/3/2011-TRU, dated 25-04-2011

Service Tax Circular No. 136/5/2011-TRU, dated 20-04-2011

Service Tax CBEC Instruction Letter D.O. F. No. 334/3/2011-TRU, dated 28-02-2011

 
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