Tax applications for hotel

This query is : Resolved

nikshit jain (Querist)
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05 February 2016 Dear Sir / Madam, we are in to the hotel business providing service of short term accommodation services. I just want to know, 1. What vat rate is applicable to us ? & on what amount? 2. whether luxury tax is applicable on room rent including complimentary breakfast or only on room rent? 3. whether service tax is applicable separately on room rent & food bill with taxable portion 60 % & 40% respectively ? Please help asap.

nikshit jain

nikshit jain (Querist)
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18 March 2016 Experts ...please help!!

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Here’s a clear breakdown for your hotel tax queries:

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### 1. VAT applicability and rate:

* VAT on **sale of food and beverages** served in the hotel (like restaurant bills).
* VAT rate varies by state (usually between 5% to 12.5%, depending on your state and type of food).
* **Room rent** typically **does not attract VAT** as it is a service, not a sale of goods.

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### 2. Luxury tax:

* Luxury tax is a **state-level tax** imposed on room rent in hotels.
* It applies to **room rent only**, **not on complimentary breakfast or other services**.
* The rate and threshold for applicability depend on the state government rules (usually levied if room rent exceeds a specified amount per day).

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### 3. Service tax applicability:

* Service tax is applicable on **room rent and other taxable services** provided by the hotel.
* Under pre-GST regime:

* Room rent above ₹1,000 per day attracts service tax.
* Service tax is charged on the **aggregate of room rent and taxable services**.
* Food bills inside hotel premises attract **service tax on 40% of the amount**, and **60% is exempt** (as per the prescribed method for restaurants in hotels).

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### Summary:

| Tax Type | Applicable On | Rate / Notes |
| --------------- | --------------------------------------- | -------------------------------------------- |
| **VAT** | Food and beverages (restaurant sales) | State-specific rates (usually 5-12.5%) |
| **Luxury Tax** | Room rent only | State-specific, on room rent above threshold |
| **Service Tax** | Room rent (if > ₹1,000/day) + Food bill | 15% (pre-GST), Food taxable portion = 40% |

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If you want, I can help you calculate a sample tax invoice or prepare tax compliance checklist for your hotel.

Do you want GST-related details as well, since GST replaced VAT, service tax, and luxury tax post July 2017?

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