Sunday, March 15, 2015

Levy of service tax on restaurants and hotel accommodation is unconstitutional

The high court of Kerala has held that Levy of service tax on : (1) service forming part of supply of goods in a restaurant, as well as, (2) short- term accommodation services in hotels, inns, etc. is unconstitutional being violate of Entries 54 and 62, respectively, of State List.Under works contract, only 'transfer of property in goods' is liable to VAT/sales-tax, therefore, service portion can be charged to service tax; however, in case of restaurants, entire supply of food (even as a part of service) is deemed to be sale and therefore, consideration therefor cannot be charged to service tax.Sum Paid to advertise group name 'HCL' instead of asses see's name was also eligible for input credit.

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