Hoteliers demand withdrawal of Service Tax on AC restaurants

All most all the hotels, restaurants and mess facilities in the district remained closed from 6 a.m. to evening on Monday demanding withdrawal of the Service Tax on air-conditioned restaurants.

Nearly 300 restaurants that are members of Coimbatore District Hoteliers’ Association participated in the nation-wide strike.

This included hotels, mess services, and some restaurants attached to hotels with lodging facility.

The business loss in the district because of the strike is estimated to be Rs. 10 crore. The Union Government introduced in the Union Budget this year Service Tax on 40 per cent of the bill amount in air-conditioned restaurants. With increasing demand for air-conditioned hotels, many were upgrading to air-conditioned halls.

The hoteliers say that the Service Tax would increase the cost for customers. They were already paying Value Added Tax.

One of the leading hoteliers in the city explained that some States had VAT rates up to 12 per cent. In Tamil Nadu it was only two per cent and applied to the entire value of the bill in all restaurants and hotels. The 12.5 per cent Service Tax on 40 per cent value of the bill would work out to nearly five per cent. The hotels were already paying Service Tax for outdoor catering and for halls rented out for events.

The Service Tax was now collected only from those who eat in an air-conditioned hall.

Customers were already paying higher rates because of the increase in input costs. The Service Tax would mean a jump in the bill amount and this would affect the customers, the hotelier said.


The hotels, restaurants, tea stalls and other eateries in Tirupur were closed in the district. According to hotel owners, the levy of Service Tax on air-conditioned restaurants was tantamount to double taxation.

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