Compulsory hotel service charges form part of sale price when mandatorily linked to the customer's bill.

Compulsory 10% service charges collected by a hotel from customers were treated as part of the sale price because they were mandatorily recoverable under the tariff card and formed an inseparable part of the bargain for supply of food and allied items. The fact that the amount was later distributed to employees or applied for breakages did not change its character, since the customer remained bound to pay it as part of the total consideration for the supply. The charge therefore fell within the statutory definition of sale price under the Bombay Sales Tax Act, 1959, and was includible in taxable turnover.

---

---

Issues: Whether the 10% service charges collected by the hotel from customers formed part of the "sale price" under section 2(29) of the Bombay Sales Tax Act, 1959.

Analysis: The charges were compulsorily recoverable from customers under the tariff card and formed part of the bargain under which food and other items were supplied in the hotel. They were not a voluntary gratuity like a tip, but an additional amount inseparably linked with the customer's obligation to pay for the supply of food in the establishment. The fact that the amount was ultimately distributed to employees or used for breakages did not alter its character as part of the total amount payable by the customer for the supply. The charge was therefore part of the price fixed by agreement between the parties and fell within the statutory definition of sale price.

Conclusion: The 10% service charges were includible in the sale price and the issue was decided against the assessee and in favour of the Revenue.

---