With the new provisions of service tax pertaining to air-conditioned restaurants with liquor licences coming into effect from May 1, the Centre on Tuesday came out with a host of clarifications on the applicability of the levy, ostensibly in view of the confusion and problems that the modified norms may have created.

For one, to bring some cheer to corporates and travelling executives, the Central Board of Excise and Customs (CBEC) has clarified that food when served in hotel rooms from their air-conditioned restaurants with liquor licences would not be subject to service tax. “When the food is served in the room, service tax cannot be charged under the restaurant service as the service is not provided in the premises of the air-conditioned restaurant with a licence to serve liquor,” the CBEC said in its circular.

The CBEC also made it clear that under the provisions of service tax to be levied on services provided by air-conditioned restaurants with licence to serve liquor, the Value Added Tax would be excluded from the taxable value. “For the purpose of service tax, State VAT has to be excluded from the taxable value,” it said. Likewise, luxury tax would also be excluded in case of short-term accommodation service. Alongside, bills for short-term accommodation provided by hotels, inns, guest houses, clubs or campsites were also to go up by 5 per cent. In its circular, the CBEC has now clarified that service tax cannot be charged under the provision of short-term accommodation if the bill for food is raised separately and does not form part of the declared tariff. It also pointed out that service tax is leviable on services provided by a restaurant if it has facility of air-conditioning in any part of the establishment and has licence to serve alcoholic beverages.

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