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Service tax on restaurant attached to a hotel

satyaprakash (Working as an assisstant in a Tax Consulting Firm) (134 Points)

17 March 2014

Hi,

Party 'A' having Hotel and a Restaurant in the same premises under the same name and ownership. Restaurant is not having any Air Condition Facility but Hotel rooms are having Air Condition Facility. Does this attracts service tax libility on food served in restaurant? If yes, Do we need to have seperate registration for this restaurant under different name to get exemption from service tax? If not liable, is there any department clarification or notification to this effect? Kindly clarify.

Regards,

Satya

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9 Replies

Supreeth Sharma (CA Final) (113 Points)
Replied 17 March 2014

I think service tax is applicable on food served in hotel rooms (AC rooms only). Since there is no AC in any part of the restaurant, service tax is not applicable on food supplied in restaurant premises.

1 Like

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 18 March 2014

Dear satya, please refer to Circular No.173/8/2013 – ST it will help you to decide your case. no need to do separate registration in your case. regards

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satyaprakash (Working as an assisstant in a Tax Consulting Firm) (134 Points)
Replied 18 March 2014

Hi Manoj,

Thanks for your help. The Circular you are referring is related to two restaurants to which food is served from common kitchen. In that case seperate registration requirement arises. but my case is of a hotel and a restaurant. In this case also seperate registration requirement arises?

Regards,

Satya

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 18 March 2014

Dear Staya

I am not 100% sure but just read this link

https://timesofindia.indiatimes.com/city/mumbai/Separate-branding-of-non-AC-eatery-must-for-tax-waiver/articleshow/23751443.cms

there is para which says

"Thus, the circular will provide respite to customers only in a few instances. "If a hotel houses a few AC restaurants and has a non-AC coffee shop with a separate branding and billing, even if there is a common kitchen, customers of the coffee shop will not have to pay service tax,"

Regards

1 Like

Rashmi (CA Final Student) (137 Points)
Replied 18 March 2014

Notification 03/2013 amends exemption notification as follows:

“Entry 19: Services provided in relation to serving of food or beverages by 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”

Eg.: A company has a building with 4 floors, in which 1 floor has canteen and the rest have offices. The offices are air conditioned whereas the canteen is not. Here, canteen services shall be taxable merely by the fact that the establishment in which it is situated is air conditioned.

Therefore, even in your case, exemption is not available and service tax shall be charged on 40% of the taxable value of services. In my opinion, a separate registration will not give you the benefit of exemption from service tax since the exclusion part of entry 19, (in any part of the establishment) shall still hold good. For further clarification in this regard, will revert to you soon.

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Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 19 March 2014

The term 'establishment' should be read in the context of restaurant and should be restricted to the restaurant, whether AC or not. In my view, no need to take seperate registration no. and no levy of service tax when the hotel is AC and restaurant is non AC. The intention is to exempt service provided at non-AC restauants and charge tax from relative rich service provided by AC restaurants, who could afford extra burden of tax.

1 Like