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Service Tax on Hotel Accomadation

kalyanaraman Venkatraman
Debate Over Finance Bill 2011: Is Service Tax on Hotel Accommodation Constitutional Under Article 246(1)? The Finance Bill 2011 introduced a service tax on hotel accommodation, raising questions about its constitutional validity. Article 246(1) of the Indian Constitution grants Parliament exclusive power to legislate on matters in the Union List, including service taxes under Entry No. 92C. Conversely, state governments can impose luxury taxes on room rents under Entry No. 62 in the State List. This raises concerns over overlapping taxation by central and state governments. Additionally, the central government's imposition of service tax on letting immovable property is contested, with its validity pending before the Supreme Court. (AI Summary)

Finance Bill 2011 has imposed service tax on hotel accomadation, kindly let me know the constitutional validity of the same with referance to the following provision.

Article 246(1) of the constitution of India states that parliament has exclusive powers to make laws with respect to any of matters specified in List I in the Seventh Schedule to Constitution(Called Union List) as per articles 246(3) state government has exclusive powers to make laws for state with respect to any matter specified in List II of seventh schedule to constitution.   

i) Entry No 92C in List I (Union List) empowers central Government impose tax on service.

ii) Entry No.62 in List II (State List) empowers state government to impose tax on, Luxuries, including taxes on entertainment, amusements, betting and gambling

Since the state government imposing luxury tax on room rent as per the power given in Entry No.62 of List II of Seventh Schedule, whether central government can impose service tax on the same base amount?

Further the Service tax on letting of immovable property is imposed by the central government where as the power is given to state government in Entry No 49 in List II of seventh schedule – Taxes on Land and Building and the constitutional validity of the matter is pending before the Supreme Court. Home Solutions Retails India Limited Vs Union of India.

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