Hi All,
I have a doubt in Service Tax, I wish to have your valuable opinions.
Can a hotel booking made purely for room purpose be called as bundled service? What tax rate should be applied for the cancellation and no show charges?
Reason for the doubt:- Terms and conditions for the hotel booking will have a clause for the cancellation, say they charge 20% of room tariff(say Rs.2,000) and assume he paid one room night in advance(Say Rs.10,000 per night). Now, if we analyze there are two services embedded in it
- Agreement to provide room – Dominant character and taxable at 8.4%.
- Tolerance for the cancellation- Taxable at 14%.
Suppose the guest cancels the booking, what rate of tax should be applied on the Rs. 2,000? Is it the abated rate of 8.4% (if bundled service then rate at which the dominant character service is taxable) or normal 14%?
Please justify your opinion with a legal backing.
Thanks in advance.