N.Kiran Kumar (manager) 23 October 2009

VAT on Service Tax

Dear Collegues,

I am working for a hotel industry. We use to sell the Food Beverage in the conference halls

If we were selling food in conference halls, we need to pay VAT & SERVICE TAX

As Per APVATACT we were paying on the total sales ( Food Sales - Rs.100/- , vat was -100*12.5% )

As per Mandap Keeper (Service Tax Act) our liability raises to pay Service Tax after adjusting abatement i.e., (Food Sales - Rs.100/- then on Rs.60 we need to pay Service Tax)

Total Tax element was - 18.70 (12.5+6.20)..

Now the Querry was APVAT authorities stating that we need to pay vat on Service Tax i.e., on Rs.6.20*12.5% in addition to Rs.12.5/-

Please advise me in this regard.

Thanks & Regards,

N.Kiran Kumar

Reply Follow

3 Replies

Vishnu Langawat (Advocate) 05 November 2009

Dear Kumar,

As our understanding prima facie the demand of Authorities is unreasonable. Service Tax provides an abatement of Rs.40 (vide Notification No.1/2006). Further in the case of K.Damodarswamy Naidy Vs State, supreme court held that no tax can be charged therefrom for transfer of property in goods comprising in an indivisible contract (applying the ratio in ur case). Thus authorities has to come on a logical solution before imposing/demanding such tax.

Hope the above answers ur concern, please do revert back to us (vishnulangawat@gmail.com) for any further information or clarification.

Regards

Vishnu Langawat

Asha Pole (Legal) 23 November 2009

Firstly in hotel industry service tax is not payable on food supplied at restaurants, while the food served in banquets/conference hall will attract service tax. To be precise let me give you an example in case of conference hall , the food selling price is Rs.100 on which you will pay service tax of 10.3%, i.e (10.3% on 100=10.3) and at the same time Vat is calculated on selling price of Rs.100 (12.5% on 100=12.50) So the total tax is (10.3+12.50=22.80), so the vat & service tax is calculated on the direct selling price.

This change is brought for the mere fact that incase of banquets/conference hall,a plot of land is reserved purely to the customer exclusive use and since land attracts service tax , while restaurants attracts liberty to the customer to use any table available.

ca prabhakar (Proprietor) 29 November 2009

As replied earlier, on food charges in hotel, no servce tax shall applicable. But if it is under conference hall both VAT is payable on 100% value and & servce tax shall payable om 60%only. However, InVAT return, you can segregate value of food & service charges and you have to pay vat on food charges only and yu can clim refund of vat on service value.

caprabhakar gupta

caprabhakargupta@rediffmail.com