1.
Airport transfers, pick-up and drop facility
2.
Sight-seeing income
3.
Income from swimming pool, internet facility,
etc. incidental to hotel business
4.
Classification in case of bundled services
I.
Airport
Transfer Facility
If the hotel provides airport transfer
facility and charges for it separately in the bill, it should be covered under
the definition for hiring/renting of cab for transfer of passengers.
Services of transport of contract carriage are
not exempt if they are meant for tourism, conducted tours, charter or hire. The
taxable value under renting of motor vehicle under abatement is 40% where no
CENVAT credit is available. The effect of reverse charge mechanism is described
as below.
Reverse charge on renting of motor vehicle:
Service
|
Service Provider
|
Service Receiver
|
Liability
|
Renting or hiring of motor vehicle deigned
to carry passenger to any person who is not in similar line of business.
|
Individual, HUF,
proprietorship or partnership firm, AOP located in taxable territory.
|
Business entity registered as body corporate
in taxable territory.
|
100% liability is of service receiver who is
a business entity where tax on 40% of value has been calculated by provider
of service.
If the service provider wishes to avail
CENVAT credit, it can pay service tax on 60% of total gross value and service
receiver shall be liable to pay tax on 40% of total gross value.
|
Since the Pvt. Ltd. hotel is not
covered under Service Providers as specified above, reverse charge is not
applicable. The hotel will have to deposit service tax @12.36% on the value of
service as charged in the bill if it intends to claim CENVAT credit on such
services. Otherwise, service tax @4.944% may be deposited and no CENVAT credit
may be availed.
II.
Sight-seeing
Income
Sight-seeing services provided by the hotel
are in the nature of tour & travel services and should be chargeable to
service tax accordingly. The percentage of total bill amount taxable is given
below.
Service in relation to
|
Taxable Value
|
CENVAT
Credit available
|
Bill/Challan
issued to contain
|
(i) a package tour
|
25%
|
No
|
The bill issued for this purpose indicates
that it is inclusive of charges for such a tour.
|
(ii) a tour, if the tour operator
is providing services solely of arranging or booking accommodation for any
person in relation to a tour
|
10%
|
No
|
The invoice, bill
or challan issued indicates that it is towards the charges for such
accommodation.
This exemption shall not apply in such cases
where the invoice, bill or challan issued by the tour operator, in
relation to a tour, only includes the service charges for arranging or
booking accommodation for any person and does not include the cost of such
accommodation.
|
(iii) any
services other than specified at (i) and (ii) above.
|
40%
|
No
|
The bill issued
indicates that the amount charged in the bill is the gross amount charged for
such a tour.
|
III.
Income
from Other Ancillary Services
The major impact and changes in the provisions
relating to the Hotel industry can be tabulated as under:
S.
No.
|
Provision
|
Prior to 1-7-2012
|
Post 1-7-2012
|
1
|
Taxability of Food supplied in
Restaurants serving liquor and being Air conditioned
|
Taxable
|
Taxable
|
Accommodation in a Hotel for
declared tariff of more than Rs. 1,000/- per day
|
Taxable for
period for less than continuous three months
|
Taxable without any exclusion of
period
|
|
Mandap Keepers' Service, Outdoor
catering Service
|
Taxable
|
Taxable
|
|
Laundry Services (i.e.
‘Dry cleaning’ as well as ‘wet cleaning’), Telephone services, No Show
charges, cancellation charges, etc.
|
Not taxable unless specifically
defined
|
Taxable in view of the
expanded definition of services
|
|
Sale of space/time for advertisement
other than by radio/television broadcast
|
Taxable
|
Exempt
|
|
2
|
Valuation
|
||
Food supplied in Restaurants serving
liquor and being Air conditioned
|
Taxable value :
30%
|
Taxable value :
40%
i.e. 4.944%
|
|
Accommodation in a Hotel for
declared tariff of more than Rs. 1,000/- per day
|
Taxable value :
50%
|
Taxable value :
60%
i.e. 7.416%
|
|
Supply of food as a part of function
for renting
|
Taxable value:
60%
|
Taxable value:
70%
i.e. 8.652%
|
|
Any other Service
(excluding Banking and Financial Services)
|
Taxable value:
100%
|
Taxable
value: 100%
i.e. 12.36%
|
|
IV.
Classification in case of Bundled
Services
In case of an
event, which is a mix of various overlapping services, the service which gives
the most pre-dominant color would be the category under which the same should
be taxed as per the new Section 66F of the Finance Act, 1994 as made applicable
from 1-7-2012.
In our opinion:
a) In case of 2N/3D package for
accommodation with meals; the pre-dominant category would be
accommodation even if the customer has food in the same restaurant like other
walk- in customers. Hence, the hotel needs to charge service tax on 60% value
of the total consideration.
b) In case of a Residential conference
or a marriage; where a package has been designed for say three days
including conference facilities, food, accommodation; since the
pre-dominant intention is arranging of a function, the correct
classification would be “Mandap keeper” and hence the hotel needs to charge
service tax on 70% value of the total consideration.
