Service Tax Applicability on Restaurants, Hotels w.e.f. 1st April, 2013
From 1st April 2013, service tax is applicable only if the restaurant has the facility of air-conditioning or central air heating in any part of the establishment at any time during the year. If the restaurant does not have any of these, no service tax will be applicable. Hence it is irrelevant whether the food restaurant have the liquor license or not. It is important to note that serving of food in a restaurant is a composite transaction involving sale and service. While food is sold, services relate to the use of restaurant space and furniture, air-conditioning, waiters, linen, cutlery and crockery, music etc are also included in the Bill.Having recognized serving food in a restaurant as a composite transaction, the question arises as to how to identify the service component.
For arriving at the service component, an abatement of 60% has been provided for food sold under Rule 2C of Service Tax (Determination of Value) Rules, 2006 and the rest of the bill amount (i.e 40%) relates to services provided by restaurant on which restaurant is liable to pay service tax. Hence from now on Dominoz, Pizza-Hut, KFC, Mc-Donald etc will be liable to pay tax. However service tax would not be applicable for Home Delivery.
Taxable Value
| Cost | Amount |
| Food Items | A |
| Beverages | B |
| Service Chargea | C[% of (A+B)] |
| Total Amount* | A+B+C |
| Service Tax on Total Amount-4.94% ie.12.36% of 40% of Total Amount | 4.94% of (A+B+C) |
*Exclusive of VAT
It is better to avail home delivery option rather than going out for dine…
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