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Service tax restaurent

CA Ashwani Agarwal (Practice) (3049 Points)

21 May 2012

https://www.servicetax.gov.in/notifications/notfns-2012/st11-2012.htm

Please see Rule 2C in the above Budget notification.. What effect does it have on the valuation of restaurent service??

Also there is another notifiation which is as follows

https://www.servicetax.gov.in/notifications/notfns-2012/st13-2012.htm

Point 4 of this notification gives abatement..

So then what will be total Service Tax after both these notifications on a Bill of Rs. 10000(Ten thousand)

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9 Replies

CA Ashwani Agarwal (Practice) (3049 Points)
Replied 21 May 2012

This is Rule 2C

“2C. Determination of value of taxable service involved in supply of food and drinks in a restaurant or as outdoor catering.- Subject to the provisions of section 67, the value of taxable service involved in the supply of food or drinks for consumption either in a restaurant or as outdoor catering service, either by itself or along with other services, shall be the percentage of total amount, specified in column 3 against the respective descripttion of services mentioned in the following Table:-

Table

Sl. No.	Descripttion	Percentage of total amount
1	2	3
1.	Service involved in the supply of food or any other article of human consumption or any drink at a restaurant	40
2.	Service involved in the supply of food or any other article of human consumption or any drink as outdoor catering service	60

Explanation 1.- For the purposes of this rule, “total amount” means the sum total of the gross amount and the value of all goods, excluding the value added tax, if any, levied on goods or services supplied free of cost for use in or in relation to the supply of food or any other article of human consumption or any drink, under the same contract or any other contract:

Provided that where the value of goods or services supplied free of cost is not ascertainable, the same shall be determined on the basis of the fair market value of the goods or services that have closely available resemblance.

Explanation 2.- For the removal of doubts, it is clarified that any goods classifiable under chapter 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) meant for human consumption shall not be considered as “inputs” for the service portion in an activity wherein goods, being food or any other article of human consumption or drink is supplied in any manner as part of the activity.”.

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CA Ashwani Agarwal (Practice) (3049 Points)
Replied 21 May 2012

So does it means that on a bill of Rs. 10000 in restaurent, the value of servie will be taken as Rs. 6000 only????

CA Ashwani Agarwal (Practice) (3049 Points)
Replied 21 May 2012

So does it means that on a bill of Rs. 10000 in restaurent, the value of servie will be taken as Rs. 6000 only????

CA Ashwani Agarwal (Practice) (3049 Points)
Replied 21 May 2012

Also here is the notification number 13

Notification No. 13/2012- Service Tax

New Delhi, the 17^th March, 2012

G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the descripttion specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely;-

Table

Sl.No.	Descripttion of taxable service	Percentage	Conditions
(1)	(2)	(3)	(4)
1	Financial leasing services including equipment leasing and hire purchase	10	Nil.
2	Transport of goods by rail	30	Nil.
3	Transport of passengers, with or without accompanied belongings by rail	30	Nil.
4	Supply of food or any other article of human consumption or any drink, in a premises, including hotel, convention center, club, pandal,shamiana or any place specially arranged for organizing a function	70	CENVAT credit on any goods classifiable under chapter 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.

CA Ashwani Agarwal (Practice) (3049 Points)
Replied 21 May 2012

This means that Abatement is given at 30% of the value of all the goods.

Which means that on the value above calculated of Rs. 6000 (60% of 10000), there will be tax @ 8.4% only(as 30%) abatement.

So tax will be Rs. 504.00

EC will be Rs.10.08

SHEC will be Rs. 5.04???

Is this the correct and proper working or is there any wrong interpretation in this??

Please reply at the earliest.

Thank you.

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Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 21 May 2012

Originally posted by : CA Ashwani Agarwal
	This means that Abatement is given at 30% of the value of all the goods. Which means that on the value above calculated of Rs. 6000 (60% of 10000), there will be tax @ 8.4% only(as 30%) abatement. So tax will be Rs. 504.00 EC will be Rs.10.08 SHEC will be Rs. 5.04??? Is this the correct and proper working or is there any wrong interpretation in this?? Please reply at the earliest. Thank you.

Simultaneous benefit under both Notification No. 13 and Service tax determination of value rule can not be availed..

I think Rule 2C of Service tax Determination of Value rule is specifically given for restaurants and this rule will apply in this case...

That is service tax will be payable on 40% of the total value..

Regards,

Pinky Agarwal.

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 21 May 2012

Originally posted by : CA Ashwani Agarwal
	This means that Abatement is given at 30% of the value of all the goods. Which means that on the value above calculated of Rs. 6000 (60% of 10000), there will be tax @ 8.4% only(as 30%) abatement. So tax will be Rs. 504.00 EC will be Rs.10.08 SHEC will be Rs. 5.04??? Is this the correct and proper working or is there any wrong interpretation in this?? Please reply at the earliest. Thank you.