Service tax relief for food served in hotel rooms

NEW DELHI: The Finance Ministry has said that food served in hotel rooms from air-conditioned restaurants holding liquor licences and housed within the hotel premises will not attract service tax.

"When the food is served in the room, service tax cannot be charged under the restaurant service as the service is not provided in the premises of the air-conditioned restaurant with a licence to serve liquor," a circular issued by the Central Board of Excise and Customs ( CBEC), the apex indirect taxes body under the Finance Ministry, said on Tuesday.

The CBEC said the value added tax ( VAT) is excluded from the total taxable value. Similarly, the luxury tax would be excluded in case of short-term accommodation service.

Finance Minister Pranab Mukherjee had, in the 2010-11 budget, announced a 10% tax on services provided by air-conditioned restaurants with a licence to serve liquor. To lessen the burden of the tax, the government provided an abatement of 70%, implying that tax would be applicable only on 30% of the total value of the bill.

Also, tax cannot be charged under the provision of short-term accommodation if the bill for the food is raised separately and does not form part of the declared tariff.