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The court’s reported decision was announced last Friday on the plea of Federation of Hotels and Restaurants Association of India (FHRAI) against the levy of this tax by taking the stand that the Parliament was not competent to legislate on this aspect.
The federation FHRAI whose members are several hotels spread all over the country, had contended that no part of the transaction of supply of food in a restaurant or hotel is now left out for being made amenable to service tax levied by a statute enacted by Parliament.
Disagreeing with the hotels stand, the bench said, “It is not possible to accept the contention of the petitioners that Parliament lacks the legislative competence to enact the Finance Act with a view to bringing the service component of the composite contract of supply of food and drinks by an air-conditioned restaurant within the service tax net.”
However, regarding another plea of levy of service tax on short-term accommodation provided in a hotel, the bench accepted their plea saying that it was an instance of encroachment by the Union into a field that was completely covered by a state legislation.
Service Tax is not the same as Service Charge levied by many restaurants in lieu of the voluntary tips. It has been levied by the government because of the service rendered while selling food and drinks. Calculated at 40% of the total bill before adding any taxes, it works out to around 5% of the total invoice. This is in addition to the VAT which is currently at 20% for Delhi and a majority of the States. Details are available at:
http://www.dnaindia.com
The news report should not confuse the readers into thinking that this is a new tax by the government. It is merely a re-confirmation by the High Court of what had been levied earlier but was contested by the Association. It is applicable on all food products and beverages including wine.
Another similar Article regarding the Service Tax of 14% applicable on the contract manufacture of alcohol, which may affect wines being bought by bigger producers on contract, may also be viewed at:
http://economictimes.indiatimes.com
Subhash Arora |