Service talx on hotel bills

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This query is : Resolved

Dev Malhotra (Querist)

17 November 2012 Service tax charged by hotels/restaraunts is to be charged on what value..?? they also charge VAT on their bills...so service tax is to charged on only the value of services or value including VAT.

Also there is abatement in case of hotels, that abatement is to be claimed on what value?? value of services or value of the total bill??

Vishakha Kejriwal.

Vishakha Kejriwal. (Expert)

19 November 2012 The value of service portion in respect of an activity at a restaurant is determined as per Rule 2(C) of the Service tax (Determination of Value Rules 2006 which specifies 40% as the taxable value of the amount charged. Further explanation to Rule 2(C) defines ‘total amount’ as sum total of the gross amount charged and the fair market value of all goods and services supplied in or in relation to supply of food, after deduction amount charged for such goods & Services and the VAT or Sales Tax charged, thereupon.
The reprieve of 60% has presumably been given for the value of food is also included in the total bill.
Hence in my opinion abatement is to be calculated on the total value of the bill.

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