The next time you are at a restaurant and you get the bill, check what you have been charged for soft drinks, bottled water and branded ice cream. All you have to pay for these items is the maximum retail price (MRP) marked on the product and nothing more – these products have been exempted from a 4.94 per cent service tax imposed by the Central government.
A recent clarification by the finance ministry said: “If goods are sold on MRP basis (fixed under the Legal Metrology Act) they have to be excluded from total amount for the determination of value of service portion.”
This clarification comes following doubts raised by the Tamil Nadu Hotels Association.
According to the association’s secretary, R. Srinivasan, there are around 15,000 ‘non-star’ category hotels in the State and this exemption is applicable to them.
“The exemption is not applicable to luxury hotels as people do not walk into such hotels just for a bottle of water. There is an element of service involved even in serving that water at such places. There is a High Court judgement to this effect,” he explained.
The sale of MRP items is high in restaurants along important highways, at tourist spots and around popular places of worship.
Along with this clarification, the ministry has also said that service tax would not be applicable at restaurants that are not air-conditioned.
The association’s president M. Venkadasubbu said that if a restaurant had air-conditioning in one part, service tax would be applicable only for food served there.
“Similarly, take away food will not attract service tax. However, food served near swimming pools or open areas attached to air-conditioned restaurants will be taxed,” he said.
The service tax came into force from April 1.
