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Circular No. 139/8/2011-TRU
F.No.334/81/2011-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Tax Research Unit
New Delhi, the 10
th
May 2011
To
Chief Commissioners of Central Excise and Customs (All),
Director General (Service Tax),
Director General (Central Excise Intelligence),
Director General (Audit),
Commissioners of Service Tax (All)
Commissioners of Central Excise (All)
Commissioners of Central Excise and Customs (All).
Madam/Sir,
Subject : Short Term Accommodation Service and Restaurant Service- clarification -regarding
Since the levy of service tax on the two new services relating to services provided by specified restaurants and by way of short-
term hotel accommodation came into force with effect from 1
st
May 2011, a number of queries have been raised by the
potential tax payers.
2. These are addressed as follows:
Short Term Accommodation Service:
Sl.
No
Queries Clarification
1.
What is the relevance
of declared tariff? Is
the tax required to be
paid on declared tariff
or actual amount
charged?
"Declared tariff" includes charges for all amenities provided in the unit of accommodation like
furniture, air-conditioner, refrigerators etc., but does not include any discount offered on the
published charges for such unit. The relevance of 'declared tariff' is in determining the liability to pay
service tax as far as short term accommodation is concerned. However, the actual tax will be liable
to be paid on the amount charged i.e. declared tariff minus any discount offered. Thus if the declared
tariff is Rs 1100/-, but actual room rent charged is Rs 800/-, tax will be required to be paid @ 5% on
Rs 800/-.
2.
Is it possible to levy
separate tariff for the
same accommodation
in respect of
corporate/privileged
customers and other
normal customers?
It is possible to levy separate tariff for the same accommodation in respect of a class of customers
which can be recognized as a distinct class on an intelligible criterion. However, it is not applicable
for a single or few corporate entities.
3.
Is the declared tariff
supposed to include
cost of meals or
beverages?
Where the declared tariff includes the cost of food or beverages, Service Tax will be charged on the
total value of declared tariff. But where the bill is separately raised for food or beverages, and the
amount is charged in the bill, such amount is not considered as part of declared tariff.

4.
What is the position
relating to off-season
prices? Will they be
considered as
declared tariff?
When the declared tariff is revised as per the tourist season, the liability to pay Service Tax shall be
only on the declared tariff for the accommodation where the published/printed tariff is above Rupees
1000/-. However, the revision in tariff should be made uniformly applicable to all customers and
declared when such change takes place.
5.
Is the luxury tax
imposed by States
required to be included
for the purpose of
determining either the
declared tariff or the
actual room rent?
For the purpose of service tax luxury tax has to be excluded from the taxable value.
Services Provided by Restaurants:
1.
If there are more than one restaurants
belonging to the same entity in a complex, out
of which only one or more satisfy both the
criteria relating to air-conditioning and licence
to serve liquor, will the other restaurant(s) be
also liable to pay Service Tax?
Service Tax is leviable on the service provide by a restaurant which satisfies
two conditions: (i) it should have the facility of air conditioning in any part of
the establishment and (ii) it should have license to serve alcoholic beverages.
Within the same entity, if there are more than one restaurant, which are clearly
demarcated and separately named, the ones which satisfy both the criteria is
only liable to service tax.
2.
Will the services provided by taxable
restaurant in other parts of the hotel e.g.
swimming pool, or an open area attached to a
restaurant be also liable to Service Tax?
The taxable services provided by a restaurant in other parts of the hotel e.g.
swimming pool, or an open area attached to the restaurant are also liable to
Service Tax as these areas become extensions of the restaurant.
3.
Is the serving of food and/or beverages by way
of room service liable to service tax?
When the food is served in the room, service tax cannot be charged under the
restaurant service as the service is not provided in the premises of the air-
conditioned restaurant with a licence to serve liquor. Also, the same cannot
be charged under the Short Term Accommodation head if the bill for the food
will be raised separately and it does not form part of the declared tariff.
4.
Is the value added tax imposed by States
required to be included for the purpose of
service tax?
For the purpose of service tax, State Value Added Tax (VAT) has to be
excluded from the taxable value.
3. Trade Notice/Public Notice may be issued to the field formations and taxpayers.
4. Please acknowledge receipt of this Circular. Hindi version follows.
(J. M. Kennedy)
Director (TRU)
Tel: 011-23092634