Exemption of service tax on declared tarrif below rs.1000/-

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CA MANDAR DEVAL (Querist)
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13 February 2016 WHETHER THIS EXEMPTION IS APPLICABLE FOR THE SINGLE ROOM?

IF SOME ROOMS HAVE DECLARED TARRIF OF SAY RS.950/- AND OTHER ROOMS WITH MORE FACILITIES HAVE DECLARED TARRIF OF RS.1500/-.
WILL THE ROOM WITH DECLARED TARRIF OF 950/- ALSO BECOME TAXABLE DUE TO SOME
ROOMS' DECLARED TARRIF IS ABOVE 999/-

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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13 February 2016 Under the scheme of service tax post 30th June 2012, all services are taxable barring those in the Negative List. The Negative List exempts "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 exemption is very clear - the declared tariff of the unit of accommodation should be below one thousand rupees per day (inclusive of service charges if any). A plain reading of the provision leads one to the conclusion that the tariff is the rate on the invoice and therefore the service charges charged by many hotels is part of the tariff. Further, a plain reading does not suggest that units with tariff below one thousand rupees per day are exempt and those above rupees one thousand per day are taxable.

Since the service provider (hotel or inn) is the registered premises, even if one of the units charges Rs.1,000/- or more per day, the exemption under Negative List is not available to that service provider.

Therefore, in the query asked, all the rooms will be covered and liable for service tax irrespective of whether the tariff is below or above rupees one thousand per day.

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