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Service tax on restaurants

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

14 June 2013

Hello Everyone,

In the union budget 2013-14 service tax is imposed on restaurant having AC facility. My question if the restaurant is having both AC section and Non-AC section, then service tax should be levied only on the food bills raised in AC section or on both AC and Non-AC section? To caculate turnover limit for registration under service tax i.e. Rs 9,00,000 and Basic exemption limit of Rs 10,00,000 do we have to consider total turnover of both AC and Non-AC sections or only AC sections? Kindly clarify. Please give reference of notifications if any in this regard.

Regards,

Satya

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7 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 14 June 2013

ST applicable if AC facility is provided in any part....so even people opting non-AC sections will also suffer....

For calculating T/over and SSP exemp limit we have to see the restaurent as a whole...so total t/over of both the sections to be seen.

1 Like

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 14 June 2013

Service tax will be applicable on only AC section and ssi exemption will be available upto 10 lakhs.

1 Like

satyaprakash (Working as an assisstant in a Tax Consulting Firm) (134 Points)
Replied 14 June 2013

Hi Arun,

Can you please let me know is there any particular reference in which it is mentioned that service tax applicable only to AC sections? Because the case i am talking about is a restaurant in which AC section and Non-AC section is in same building attached to each other.

Regards,

Satya

sai krishna.c (CA articles) (36 Points)
Replied 14 June 2013

Hi satya,

SSP limit will include the value of all taxable srvices provided by an assessee from one or more premises.The word used is taxable services,providing of non a/c resaturant services is not a taxable service.Hence only the value of services provided from A/c premises wud only be included.

Rgards,

sai.

sai krishna.c (CA articles) (36 Points)
Replied 14 June 2013

Hi satya,

Sorry abt my earlier opinion. According to Budget 2013

Services provided in relation to serving of food or beverages or other article of human consumption (whether intoxicating or not) by a restaurant, eating joint or a mess, having:

(i) The facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year

Supplied in Any Manner, as a part of the activity

I did not se the word any part of the establishment earlier. sorry!!!

So,even if A/c is present in part of the restaurant ST is applicable to the entire establishment.

Thanx for giving me an opportunity to get my understanding right.

Regards,

sai.

1 Like

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 16 June 2013

Dear Sir,

As rightly pointed by Mr. Sai Krishna, and if we go by literal interpretation, then if you provide facility for AC in your restaurant for even a day during the financial year, then you will be liable for service tax on the billings of the entire restaurant!!!

That may not be the intension of the legislature, but it seems to be the law untill some judicial pronouncement is done. In my view, the exemption notification is very loosly worded and is unclear and invites litigations. If any expert has different view, kinldy enlighten for the benefit of all, with reference to the case law or otherwise.

Regards,

Manoj Agarwal

1 Like

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 13 August 2013

Please note that the Hon'ble High Court of Kerala has held on 03-07-2013 that the levy of service tax by the central government on supply of food & beverages is unconstitutional.