SHORT TERM ACCOMODATION

[sunil mehta]

A service provider (Hotel ) provides accomodation services to its customers .Hotel has fixed its room tariff for some rooms @Rs.1000/- and above and for few rooms below Rs.1000/-.Suitable exemption has been given vide Notification 31/2011-ST  dt. 25/04/11.TRU circular no.3345/3/2011 dt.25/4/11 has clarified that 'declared tariff' has been defined in the notfn. and it will include all amenities,facilities etc provided in the unit of accomodation. But the circular says that cost of bed will not form part of 'declared tariff'  The bill issued to customer shows (i) regular room tariff ,----Rs.1100/-

(ii)cost of extra bed (ii)Rs.300/- (iii) cost of meals/breakfast  Rs.500/- (iv) laundary chgs. Rs.100/-

Query:-1)What is the amount of services are taxable?

2)Whether cost of extra bed Rs.300/- will form part of taxable services ?i.e taxable value of the bill will be Rs.1400(1100+300) or Rs.1100/-?Since amt. recd. on account of 'extra bed' is in relation to 'Room Tariff' value whether it will be legally advisable to include such valu for purpose of levying service tax?

3)Whether laundary chgs. Rs.100/- will be included ?

[ROHAN THAKKAR]

The service of ‘Short Term Accommodation’ has been brought into the tax net with effect from the current budget. Following is taxable under short term accommodation:

‘Any services provided or to be provided to any person by a hotel, inn, guest house, club or camp-site, by whatever name called, for providing of accommodation for a continuous period of less than three months’

Further, Notification No 31/2011 has also clarified that if the declared tariff is less than Rs 1,000, then service will not be taxable. In this regard, ‘declared tariff’ means, “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.

What has been stated is that value of amenities provided in the unit of accommodation will be included in the declared tariff. However, tax will be charged on the actual amount charged from the customer. Declared tariff merely sets up an eligibility criteria as to whether a hotel is required to pay service tax or not.

Service tax is on services provided by ********* for providing accommodation****. Accommodation means ‘stay’. Thus, if extra bed is taken by the customer, it will be for the accommodation of one additional person.

Thus, cost of bed will form a part of value. Consequently, the value of service will be considered as Rs 1400 (1100+ 300). However there is an abatement of 50% [Notification No 1/2006-ST as amended]

The next issue comes is of the food / meal / breakfast.

In this connection, 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.

For example, if the hotel charges Rs 3000 per day and also provides one breakfast, one lunch, one dinner, two tea or coffee etc for which the customer is not required to pay service tax and the amount will remain same irrespective of fact whether the customer eats at the hotel or not. In such case, the service tax is required to be charged on Rs 3,000 only.

However, if there is a separate bill for the food and separate bill for accommodation, then service tax is required to be charged only on the accommodation bills only.

It must be noted that if the hotel is having a separate restaurant along with it and  has air conditioning facility and has also license to serve liquor in it, then service tax is required to be paid under ‘Restaurant having the facility of air conditioning and license to serve liquor’.

Laundry Charges

The laundry charges are not the charges provided in relation to accommodation. Consequently, service tax is not required to be charged on the amount received as laundry charges. However, the same amount must be shown separately in the invoice.

 

Regards,

CA Rohan Thakkar

+91 9228720536

 

AI Summary

Short term accommodation tax: extra bed and included amenities form part of taxable accommodation value, separate food/laundry excluded. Short term accommodation is taxable for stays under three months where the declared tariff (including unit amenities) meets the notification threshold; tax applies to the actual amount charged. Charges for extra beds form part of the accommodation service value and are included in the taxable base (subject to applicable abatement). Separately billed food and laundry charges are excluded from the declared tariff and thus not taxed as accommodation, while food included in declared tariff is part of the taxable accommodation value; separate restaurant classification may apply where AC and liquor licence conditions exist.