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Service tax on bundled service - cancellation charges

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student

Final

66 Points Posted on 15 October 2015

Hi All,

I have a doubt in Service Tax, I wish to have your valuable opinions.

Can a hotel booking made purely for room purpose be called as bundled service? What tax rate should be applied for the cancellation and no show charges?

Reason for the doubt:- Terms and conditions for the hotel booking will have a clause for the cancellation, say they charge 20% of room tariff(say Rs.2,000) and assume he paid one room night in advance(Say Rs.10,000 per night). Now, if we analyze there are two services embedded in it

Agreement to provide room – Dominant character and taxable at 8.4%.
Tolerance for the cancellation- Taxable at 14%.

Suppose the guest cancels the booking, what rate of tax should be applied on the Rs. 2,000? Is it the abated rate of 8.4% (if bundled service then rate at which the dominant character service is taxable) or normal 14%?

Please justify your opinion with a legal backing.

Thanks in advance.

Replies (1)

U S Sharma

glidor@gmail.com

21670 Points Posted on 15 October 2015

tolerance for cancellation is related to room too, as the booking was made for room and cancellation also gone for room too, so tolerance does not make a seperate identity coz the theme of transation was based on room booking and cancellation only, so the ratained amount will attract same rate of service tax as goes for normal booking of the rooms.