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Service Tax on Hotel Accomadation

kalyanaraman Venkatraman
Taxation of hotel accommodation: central service tax may overlap with state luxury tax raising a constitutional conflict. The note challenges central imposition of service tax on hotel accommodation that may overlap with state-imposed luxury tax on room rent, citing the constitutional division of legislative power between Union authority to tax services and State authority to tax luxuries; it also notes a related dispute over central taxation of letting of immovable property against State power over taxes on land and buildings and an exclusion in the renting definition for residential accommodation including hotels. (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.

Kindly share your views.

Service Tax
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satish nair on Apr 15, 2011

I have to add my two bit that in renting of immovable property explanation given therein ... does not include building used for residential purposes and accomodation including hotels, hostels etc.

This has not been withdrawn till date.

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