{"id":1423,"date":"2014-02-12T00:00:00","date_gmt":"2014-02-11T18:30:00","guid":{"rendered":""},"modified":"2016-07-29T12:29:10","modified_gmt":"2016-07-29T06:59:10","slug":"service-tax-on-restaurants","status":"publish","type":"post","link":"https:\/\/taxclick.org\/type\/services-tax\/service-tax-on-restaurants\/","title":{"rendered":"Service Tax on Restaurants"},"content":{"rendered":"

All of us visit restaurants, hotels or eating houses. And many of us also notice that recently the bills issued by some restaurants have service tax mentioned in it. Let us try to understand the concept of service tax on restaurants.<\/p>\n

Prior to 1st <\/sup>July 2012, restaurants serving food & beverages and having a licence to serve alcoholic beverages <\/strong>only were covered by service tax. After 1st <\/sup>July 2012, the component of service in any activity of serving food & beverages including alcoholic beverages was declared as a taxable service. With effect from 1st<\/sup> April 2013, the necessity of having licence to serve alcoholic beverages was deleted. Thus all restaurants from 1st<\/sup> April 2013 having air conditioning or central air heating system will be liable to service tax.<\/strong><\/p>\n

It may be noted that the facility of air conditioning or air heating could be provided at any time during a financial year in any part of the restaurant. It is not necessary that it should be provided for the entire year. Some restaurants have separate air-conditioned rooms. These restaurants are also covered by service tax.<\/p>\n

Valuation & Abatement of Restaurant Service<\/strong><\/p>\n

As per Rule 2C of Service Tax (Determination of Value) Rules, 2006, 40% of the total bill will considered as service part. Abatement of 60% of the total bill is provided in restaurant services. Hence, service tax will be computed on 40% of the total bill. Service Tax @ 12.36% will be calculated on 40% of the total bill. Thus the effective rate of service tax in such cases will be 4.944% (40 x 12.36%)<\/p>\n

While calculating the total value, VAT should be excluded from the taxable value. <\/strong><\/p>\n

Certification by CBEC<\/strong><\/p>\n

\u00a0<\/strong>CBEC has issued Circular No. 173\/8\/2013-ST dated 07\/10\/2013<\/a> and clarified following important points:-<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0 In a complex, if there is more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the specified restaurant is liable to service tax and service provided in a non air-conditioned or non centrally air- heated restaurant will not be liable to service tax. In such cases, service provided in the non air-conditioned \/ non-centrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules<\/p>\n

2.\u00a0\u00a0\u00a0\u00a0 Services provided by specified restaurant in other areas of the hotel are liable to service tax. For example Food serve on swimming pool or an open area attached to the restaurant are liable to service tax.<\/p>\n

3.\u00a0\u00a0\u00a0\u00a0 If goods are sold on MRP basis (fixed under the Legal Metrology Act) they have to be excluded from total amount for the determination of value of service portion<\/p>\n

Cenvat Credit for Restaurant Services<\/strong><\/p>\n

Explanation 2 to Rule 2C of Service Tax (Determination of Value) Rules expressly provides that the provider of taxable service i.e. restaurant service in this case, shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of Central Excise Tariff Act, 1985. Input credit of any other input services, goods or capital goods other than those specifically excluded can be taken.<\/p>\n

Goods mentioned in the Chapters 1 to 22 are:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

 <\/p>\n

Chapter 1:<\/td>\n

\n

 <\/p>\n

Live Animals<\/td>\n<\/tr>\n

Chapter\u00a02:<\/td>\n\u00a0Meat and edible meat offal<\/td>\n<\/tr>\n
Chapter\u00a03:<\/td>\n\u00a0Fish and crustaceans,\u00a0molluscs\u00a0and other aquatic invertebrates<\/td>\n<\/tr>\n
Chapter\u00a04:<\/td>\n\u00a0Dairy produce; birds\u2019 eggs; natural honey; edible products of animal origin, not elsewhere specified or included<\/td>\n<\/tr>\n
Chapters\u00a05-6<\/td>\nChapter 5: Products of animal origin, not elsewhere
\nspecified or included<\/td>\n<\/tr>\n
\n

SECTION-II<\/p>\n

VEGETABLE PRODUCTS<\/td>\n<\/tr>\n

<\/td>\nChapter 6: Live trees and other plants; bulbs, roots and the like; cut flowers & ornamental foliage<\/td>\n<\/tr>\n
Chapter\u00a07<\/td>\nEdible vegetables and certain roots and tubers<\/td>\n<\/tr>\n
Chapter\u00a08<\/td>\nEdible fruit and nuts; peel of citrus fruit or melons<\/td>\n<\/tr>\n
Chapter\u00a09<\/td>\nCoffee, tea, mate and spices<\/td>\n<\/tr>\n
Chapter\u00a010<\/td>\nCereals<\/td>\n<\/tr>\n
Chapter\u00a011<\/td>\nProducts of the milling industry; malt; starches;\u00a0inulin; wheat gluten<\/td>\n<\/tr>\n
Chapter\u00a012<\/td>\nOil seeds and oleaginous fruits, miscellaneous
\ngrains, seeds and fruit; industrial or medicinal plants; straw and fodder<\/td>\n<\/tr>\n
Chapter\u00a013<\/td>\nLac; gums; resins and other vegetable saps and
\nextracts<\/td>\n<\/tr>\n
Chapter
\n14<\/td>\n		Vegetable plaiting materials; vegetable products,
\nnot elsewhere specified or included<\/td>\n<\/tr>\n
\n

SECTION-III<\/p>\n

ANIMAL OR VEGETABLE FATS\u00a0AND\u00a0\u00a0OILS\u00a0AND THEIR CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL OR VEGETABLE WAXES.<\/td>\n<\/tr>\n

Chapter
\n15<\/td>\n		Animal or vegetable fats and oils and their cleavage
\nproducts; prepared edible fats; animal or vegetable waxes<\/td>\n<\/tr>\n
\n

SECTION-IV<\/p>\n

PREPARED FOODSTUFFS; BEVERAGES AND VINEGAR; TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES<\/td>\n<\/tr>\n

Chapter\u00a016<\/td>\nPreparations of meat, of fish or of crustaceans,\u00a0molluscs\u00a0or other
\naquatic\u00a0\u00a0invertebrates<\/td>\n<\/tr>\n
Chapter\u00a017<\/td>\nSugar and sugar confectionery.<\/td>\n<\/tr>\n
Chapter 18<\/td>\nCocoa and cocoa preparations<\/td>\n<\/tr>\n
Chapter\u00a019<\/td>\nPreparations of cereals, flour, starch or milk;\u00a0pastrycooks’ products<\/td>\n<\/tr>\n
Chapter\u00a020<\/td>\nPreparations of vegetables, fruit, nuts or other
\nparts of plants.<\/td>\n<\/tr>\n
Chapter\u00a021<\/td>\nMiscellaneous edible preparations<\/td>\n<\/tr>\n
Chapter\u00a022<\/td>\nBeverages, vinegar and spirits<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

All of us visit restaurants, hotels or eating houses. And many of us also notice that recently the bills issued by some restaurants have service tax mentioned in it. Let us try to understand the concept of service tax on restaurants. Prior to 1st July 2012, restaurants serving food & beverages and having a licence … Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5],"tags":[96],"yoast_head":"\nService Tax on Restaurants - All About Finance<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/taxclick.org\/type\/services-tax\/service-tax-on-restaurants\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Service Tax on Restaurants - All About Finance\" \/>\n<meta property=\"og:description\" content=\"All of us visit restaurants, hotels or eating houses. 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