Monday, September 19, 2016

Service tax on short-term stay quashed

The Delhi High Court struck down the 2011 finance act provision whereby service tax was imposed on provision of short term accommodation. The provision was for levy of tax on a "hotel, inn, guest house, club or camp site by whatever name called, for providing of accommodation for continuous period of less than 3 months". The petition was filed by the federation of hotels and restaurants association of India. The federation argue that parliament had no power to impose such a levy, and it was the state legislature that had the competence under the constitution. The court party partially allow the petition. It rejected the challenge to another clause in the act that levied service tax on restaurants "having the facility of air conditioning in any part of the establishment, which has license to serve alcoholic beverages, in relation to serving food or beverage, in its premises".

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