Service Tax on Restaurant Services from 01-04-2013
The change in Budget 2013-14 has covered all the restaurants, eating joints, outlets or food places in any other name under service tax that does not serve liquor or alcohol. Though only few words changed in the text but this will bring lot of revenue because few fast growing states like Gujarat (dry states) are added in service tax net now even under restaurant services.
The said changes are applicable from 01-04-2013 as precribed in Notification No. 03/2013 dated 01/03/2013 and to charge service tax to customers from April the restaurants are required to (or at least apply) take registration on or before 1st April 2013 itself.
For full text on all Budget changes related to Service Tax please refer our article at – http://aviratshiksha.wordpress.com/2013/03/04/service-tax-budget-2013-14-speech-text-and-interpretation/
Analysis of new change -
- Liquor license or sale is irrelevant.
- The restaurants covered shall have at least one air-conditioning unit or central air-heating in any part of establishment. If either air-conditioning unit or central air-heating is not there then such restaurants are excluded from service tax.
- Restaurants services include supplies of goods as well and therefore these are composite nature of services. To avoid service tax levy on goods as per Rule 2C of Service Tax (Determination of Value) Rules, 2006 prescribed from 01-07-2012 under Notification No. 24/2012, the abatement is available for restaurant service @ 60%. Therefore the effective service tax payable will be 4.944%. (12.36*40%).
- VAT amount is to be excluded while calculating service tax.
- If the abatement option is to be availed then service provider shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985. It means excise duty or cess paid on the other inputs are eligible for CENVAT Credit. In addition to that, the excise duty paid on capital goods and service tax paid on input services are available as CENVAT Credit subject to CENVAT Credit Rules, 2004 and further amended from time to time.
- The benefit of threshold exemption of Rs. 10 lakh is definitely available.
- The benefit of paying service tax on receipts basis is available till turnover of Rs. 50 lakhs.
Be ready to pay even service tax next time you visit Pizza Hut or McD! Even if without a booze!
CA GAUTAM JOSHI