Service tax on Short term accommodation Service

PrintPDF Short term accommodation Service has been defined in clause (zzzzw) of Section 65(105) which reads as any service provided

“to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months.”

The levy proposes to tax service of providing short term accommodation by hotels, inns, guest houses, clubs and others and at camp-sites. This service is proposed to be taxed where the continuous period of stay is less than 3 months and the declared tariff for providing of such accommodation is less than rupees 1000 per day. “Declared Tariff” includes charges for all amenities provided in the unit of accommodation like furniture, air-conditioner, refrigerators etc., but does not include any discount offered on the published charges for such unit.

This levy comes into force on the 1st day of May, 2011.

The scope of this service has been clarified vide D. O. F. No. 334/3/2011-TRU 25th April, 2011 as under:-.

In accordance with the budget announcement, the levy will be applicable on short-term accommodation with a declared tariff of Rs 1000 per day or above. A suitable exemption has been given below this amount vide notification No. 31/2011-ST dated April 25, 2011. Declared tariff has been defined within the notification as charges for all amenities provided in the unit of accommodation. Thus it will include cost of all electronic gadgets installed in the room and any other facility normally provided by a hotel as part of the stay. Cost of extra bed will not form a part of the declared tariff. No further exclusions are provided from the declared tariff e.g. on account of breakfast or any other meal whose cost is included in the declared tariff including any discount given to the customer. However an exemption @ 50% has been given by amending the notification No.1/2006-ST dated 01.03.2006 vide notification No. 34/2011-ST dated April 25, 2011 provided no Cenvat credit is availed either of inputs or input services. The actual levy is restricted to accommodation with declared tariff of Rs. 1,000 per day or higher Once this requirement is met, tax will be chargeable irrespective of the fact that actually the amount charged from a particular customer is less than Rs. 1,000. The tax will also be charged on the gross amount paid or payable for the value of the service.

In many hotels various types of rooms are provided starting with single occupancy room to a luxury suit. The tariff depends upon the type of room provided. A single occupancy room rent may be less than Rs. 1000/- while the room rent of luxury suit may be in excess of Rs. 5000/- per day. In such a case the levy shall apply to the luxury suit only as the tariff exceed Rs. 1000/- per day. Any discount given from out of published tariff shall be ignored and service tax shall be levied and the full rate and not the discounted or negotiated tariff.

Since the tariff is fixed on per day basis, it is important to know what does a day mean. In hotels ,inns etc. the period means “period from check-in to check-out time”. If this time is say, 10 Am, then a guest checking in at 7 AM and checking out at 3 PM same day, will be charged for two days even though he has not stayed for a full day of 24 hours. Once the requirement of Rs. 1000/- or more is met, tax will be chargeable irrespective of the fact that actually the amount charged from a particular customer is less than Rs 1,000. The tax will also be charged on the gross amount paid or payable for the value of the service. One can make his own guess as to what does a period means. Well in the above stated case , even a period of 8 hours constituted 2 days.

Moreover, since the levy is attracted only in case of a continuous period of less than three months, any continuous stay of more than 3 months is not taxable under this class.