FHW Staff– 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 organised seminars to understand the impact of VAT, luxury tax and service tax on various activities of hotels and restaurants. The seminars will be organised for food […]
FHW Staff– 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 organised seminars to understand the impact of VAT, luxury tax and service tax on various activities of hotels and restaurants. The seminars will be organised 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, recently received a positive response from the FBOs. The session on VAT and luxury tax was addressed by Govind Goyal, a chartered accountant and Sheel Bhanushali spoke on matters related to service tax.
Bharat Malkani, president, HRAWI, said, “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 organise such seminars in the interest of our members.”
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 organisation viz star hotels, club houses, small hotels, sweets and farsan shops, bakeries and catering.
Explaining the basics Goyal said, “Unlike in the past, since April 1, 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 one per cent, declared goods, industrial inputs, and such other specified goods are charged at the rate of five per cent; 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 per cent.” 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 INR1000, between INR1001– INR1500 at four per cent and exceeding INR1500 at 10 per cent.”
Speaking about the service tax applicable for the hospitality sector 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 Bhanushali said, “The definition of mandap is very vide in its coverage and covers all immovable properties let out for organising 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 organising 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.”