Service tax on food supplied in hotel room

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2016 Dear All,

I want to know what should be the rate of service tax, if food is served in hotel room to the customer.

Shishir Nayak

Shishir Nayak (Expert)
Follow

01 July 2016 The Charges for the Food served in a Restaurant is a composite charge for the food as well as for the Services. As it is a composite charge, Service Tax cannot be levied on the whole amount.

Bifurcation of the Total Bill into 2 parts i.e. Value of Goods Sold and Value of Services Provided is very Difficult. herefore in case of any Composite Charge, the Govt usually announces an abatement scheme wherein Taxes are not levied on the total amount but only on a certain portion of the total
amount
In order to ensure transparency and standardization in the manner of determination of the value of such service provided in a restaurant or as outdoor catering, Rule 2C was inserted in the Service Tax.

As per this Rule, abatement has been allowed for the levy of Service Tax on the Food Served in Restaurants which says that Service Tax should be charged only on 40% of the Food Bill ( Service Charge) and not on the Total Bill.

Or in other words only 6% Service Tax on Restaurant (i.e 40% of 15%) shall be chargeable. The Computation of service Tax has been explained below with the help of an example. For the purpose of simplification VAT has been presumed at 14 50% on the Total Food Bill.