Non-AC restaurants are exempt from Service Tax

Non-AC restaurants are exempt from Service Tax, Govt. clarifies

SECTION 66E(I) OF THE FINANCE ACT, 1994, READ WITH RULE 2C OF THE SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006 - DECLARED SERVICES - CLARIFICATION ISSUED IN MATTER OF SERVICE TAX ON SERVICES PROVIDED BY RESTAURANTS, EATING-JOINTS OR MESSES WHICH HAVE FACILITY OF AIR-CONDITIONING OR CENTRAL AIR-HEATING IN ANY PART OF ESTABLISHMENT

PRESS RELEASE, DATED 9-6-2015

At present, Service Tax is chargeable on services provided by restaurants, eating-joints or messes which have the facility of air-conditioning or central air-heating in any part of the establishment at any time during the year in relation to serving of food or beverages. Restaurants, eating-joints or messes which do not have the facility of air-conditioning or central air-heating in any part of the establishment are exempt from service tax. In other words, only air-conditioned or air-heated restaurants are required to pay Service Tax.

In respect of such air-conditioned or air-heated restaurants which are required to pay Service Tax, 60% of the value is to be deducted from the total amount charged while applying the rate of Service Tax and tax is to be calculated on the balance 40%. With the increase in the rate of Service Tax to 14% (subsuming the Education Cesses) with effect from 1.6.2015, the effective rate of tax will be 5.6% of the total amount charged. Prior to 1.6.2015, when the rate of Service Tax was 12.36% (including Education Cesses), the effective rate was 4.94%.