Exemption Notification 25/2012
18. 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 Rs. 1000 per day or equivalent;
2(n) “declared tariff” includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit;
Question 1
If the rent for room is Rs. 1100 but Rs. 300 is offered as discount and thus rent charged is Rs. 800, then will no service tax will be levied as Rs. 800 is less than Rs. 1000 thus exempt.
Do we deduct rent while considering limit of Rs. 1000 or not?
Question 2
If the rent charged for the room is Rs. 5000 per day and the person stayed in hotel for 2 days, what will be the journal entries in the books of both service provider and service receiver.
Need to keep in mind that when rent is more than equal to Rs. 1000 per day then the service is not exempt but as per abatement notification 26/2012 Sr. No. 6 only 60% of the amount is taxable.
Question 3
Mr. Kapoor goes to Hotel Picaddily and stays there for 1 day. Rent of the room is Rs. 800 per day.
During night he goes to the restaurant of Hotel Picaddily downstairs and have dinner. The restaurant has AC.
Dinner bill is Rs. 500.
(a) Will service tax be levied on his dinner bill? Mr. Kapoor says that since his room rent is less than Rs. 1000 no service tax should be levied? Can we consider the restaurant dining as "other amenities" mentioned in the definition of "declared tariff" in the exemption notification?
We should keep in mind that if Mr. Kapoor had not taken any room in Hotel Picaddily and had just gone for dinner there, service tax would have been payable though on 40% of his bill amount as per the composition scheme of Rule 2C of Service Tax (Determination of Value) Rules.
Regards
CAclubindia
