VAT, Luxury Tax & Service Tax Demystified For The
Hospitality Industry
Mumbai: As part of the initiatives taken for the benefit
and awareness of hoteliers and restaurateurs, the Hotel and Restaurant
Association of Western India (HRAWI) has organized special seminars to understand
the impact of VAT, luxury tax and service tax on various activities of hotels
and restaurants. The seminars will be organized for Food Business Operators
(FBOs) in various cities of the western region including Mumbai, Pune, Bhopal,
Ahmedabad, Goa and others in the coming months. The first seminar held at The
Ambassador hotel, Mumbai, yesterday received an overwhelming response from the
FBOs. The session on VAT and Luxury Tax was addressed by Shri Govind Goyal, a
well-known chartered accountant and Mr. Sheel Bhanushali spoke on matters
related to Service Tax.
“The hospitality
industry is presently gripped by several harsh policies and; direct and
indirect taxation that is hurting the sector. It is very important for everyone
in this industry to be abreast of changes and developments taking place from
time to time. For this, the association has and will continue to organize such
seminars in the interest of our members,” said Mr. Bharat Malkani, President,
HRAWI.
During the seminar the
Subject Matter Experts (SME) highlighted several laws and policies related to
VAT, Luxury Tax and Service Tax. This included the criteria under which taxes
are applicable and liability classified based on person, event, rate or value.
The seminar also discussed the issues of overlapping of taxes besides giving
clarity over taxation based on the types of organization viz Star hotels, club
houses, small hotels, sweets and farsan shops, bakeries and catering.
Explaining the
basics Mr. Govind G. Goyal said, “Unlike in the past, since 01.04.2005 there is
no separate Purchase tax, Turnover tax, Resale tax, Surcharge, Works Contract
tax, Lease tax etc. There is only one tax now i.e. the Value Added Tax (VAT). VAT
is levied on the turnover of sales of goods at such rate as specified in
respective schedules that include Essential commodities that are tax free;
gold, silver, precious stones, pearls, etc attract a VAT of 1%, declared goods,
industrial inputs, and such other specified goods are charged at the rate of 5%;
foreign liquor, country liquor, motor spirits, etc. are the ones that may
attract VAT at certain specific rates and all other goods are taxed at 12.5%.”
Also highlighting the recent revisions made to the Luxury tax he said, “The
Luxury tax is not applicable for hotel rooms for a tariff of up to Rs.1000,
between Rs.1001 – Rs.1500 at 4% and exceeding Rs.1500 at 10%.”
Speaking about the
Service Tax applicable for the hospitality sector Mr. Sheel Bhanushali
explained the various services that various hotels provide activity-wise. Based
on whether it provides only accommodation or if it’s a casino or a club
membership, he elaborated on the taxes an entity would incur.
Providing clarity on
the definition of a Mandap and its tax implications Mr. Bhanushali said, “The definition
of mandap is very vide in its coverage and covers all immovable properties let
out for organizing social, official or business functions. Hotels and
restaurants providing facility like kalyana mandaps or marriage halls, banquet
halls, conference halls etc. within their premises for organizing any social,
official or any business function shall also be obviously included in the
coverage of service tax. Therefore the levy of service tax will apply in all such
cases.”
About Hotel & Restaurant Association Western India
(HRAWI)
The Hotel and Restaurant Association (Western India) is a 64 years old
Association of Hotels and Restaurants in Western India. Its members include smaller
Hotels up to 5-Star Deluxe categories. The bulk of its members, like any growth
economy is made up of budget hotels. With around 1300 members across Western
India, HRAWI covers Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and
the Union Territories of Daman, Diu & Silvassa, and is considered to be the
voice of the Hotel Industry. The association is part of the national body of
Federation of the Hotels & Restaurants Associations of India (FHRAI),
located in New Delhi, which was originally founded in Mumbai in 1950 by the
late Mr. J.R.D. Tata.
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