Service Tax on Telephone Call charges collected by hotels

[Sumeet Tholle]

Sir,

One of the my client is 5 Star Hotel. They are collecting telephone call charegs from their customers but not collecting Service Tax extra and not paying ST on that to Govt.

They are doing this practice since a long time i.e. 8-10 years.

Audit Party asked them to pay Service Tax on Telephone Call charges collected under Business Auxiliary Service and the demand is for 5 years.

Is Servive tax Payable prior to 01/07/2012 ?

Pl. guide.

Thanks.

Sumeet

 

 

 

[YAGAY and SUN]

If this 5 star hotel is by adding markup while charing the telephone expenses to it's customer then you are liable to pay the tax on such charges, otherwise not.  There was a recent judgment of the Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India (2012) 12 TMI 150 (Delhi) which says that reimbursement of expenses would become the part of taxable amount for the purpose of calculating of Service Tax.

AI Summary

Service tax on reimbursed telephone charges applies where a hotel adds markup, making those charges part of taxable value.
Whether hotels must remit service tax on telephone charges depends on whether they add a markup; marked-up recharges form part of the taxable consideration under Business Auxiliary Service. A cited judicial ruling treats reimbursement of expenses as includible in taxable value for service tax, supporting retrospective demands where auditors treat recharged amounts as taxable.