Hotel / restaurent - rs. 10 lakh exemption & abatement
Kuldeep
(Querist) 24 January 2012
This query is : Resolved
Restaurant service & accomodation service are made liable to tax from 1.5.11. Notification No 1/2006 exempts 70% / 50% of amount received from tax. Condition is that the assessee should not avail cenvat credit and should not avail benefit of Noti 12/2003.
Notification No 6/2005 (small scale exemption) exempts gross amount charged towards taxable service upto first Rs. 10 lakh. The value of "Wholly" exempt service is to be excluded from Rs. 10 lakh (Explanation B of Notification 6/2005). In case of hotels / restaurants, the exemption is partial. (50% & 70%). Question is : For calculating exemption of Rs. 10 lakh, whether 30% or 50% as the case may be should be taken or full amount should be taken? Example : Restaurant sale amount : Rs. 14,00,000/- Working 1 : 14,00,000 X 30% = 4,20,000/ - It is less than Rs. 10 lakh so no service tax. Working 2 : 14,00,000 – 10,00,000 = 4,00,000 is liable. 4,00,000 X 30% = 1,20,000 taxable. Service tax 1,20,000 X 10.3% = 12,360. Which is correct ? Dept. stand is working 2.
Raj Kumar Makkad
(Expert) 24 January 2012
It shall be better for you to discuss the calculation with any chartered Accountant rather of lawyers.
A V Vishal
(Expert) 24 January 2012
The department is right you have to consider working 2 since the requirement under service tax is that if the taxable service exceeds Rs.10.00 lakhs you are liable to payment of service tax, the abatement is for tax and not turnover. Since in your case the value of taxable service is more than Rs.10.00 lakhs viz. Rs.14.00 lakhs you are required to collect and pay the service tax as the service provider.
