Effective rate of service tax on restaurant having air condition facilities has increased to 5.6% from 1st June 2015

Circular No. 184/3/2015-ST

 Dated
the 3rd
June, 2015

 F.
No. 334 / 5 /2015-TRU (Pt.)

 Government
of India

Ministry
of Finance

 Department
of Revenue

 (Tax
Research Unit)

***

 

Dated
the 3rd  June, 2015.

To

 Chief
Commissioner of Customs and Central Excise (All)

 Chief Commissioner of Central Excise &
Service Tax (All) Director General of Service Tax

 Director General of Central Excise
Intelligence Director General of Audit,

 Principal Commissioner/ Commissioner of
Customs and Central Excise (All) Principal Commissioner/Commissioner of Central
Excise and Service Tax (All) Principal Commissioner/Commissioner of Service Tax
(All)

 

Madam/Sir,

 Subject:
Clarification on rate of service tax on
restaurant service – regarding.

 The
Service Tax rate has been increased to 14% with effect from 1st June, 2015. Certain doubts have been raised in regard to
abatement on value of services provided in relation to serving of food or
beverages by a restaurant, eating joint or a mess, having the
facility of air-conditioning or central air-heating
in any part of the
establishment, at any time during the year.

 

2.
Matter has been examined. Valuation of services provided in relation to serving
of food or beverages by a restaurant, eating joint or a mess having the
facility of air-conditioning or central air-heating in any part of the
establishment,
is determined as provided in rule 2C of the Service
Tax (Determination of Value) Rules, 2006. In the said rule, service portion in
an activity wherein goods, being food or any other article of human consumption
or any drink (whether or not intoxicating) is supplied in any manner as a part
of the activity, at a restaurant has been specified as 40 percentage of the
total amount charged for such supply. In Budget, 2015, no change has been made
in abatement and the rate of service tax on the abated value has been increased
to 14% with effect from 1st June, 2015. Therefore, effective service
tax rate would be 5.6% (14% of 40%) of the total amount charged.

 Hence, with the
increase in the applicable rate of service tax from 12.36% (including education
cesses) to 14%, the effective rate on such establishments has increased from
4.9% to 5.6% of the total amount charged.

 

3.                 
It is further clarified that exemption from service tax still
continues to services provided in relation to serving of food or beverages by a
restaurant, eating joint or a mess, other than those having the facility of
air-conditioning or central air-heating in
any part of the establishment,
at any time during the year.

 

4.               
All
concerned are requested to acknowledge the receipt of this circular.

 

5.             
Trade Notice/ Public Notice to be issued. Wide publicity
through local news media including vernacular press may be given. Hindi version
shall follow.

Yours
faithfully,

  

(Akshay Joshi)
Under Secretary to Government of India

 

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