FAQ on Service tax on Restaurants

There is lot of Confusion regarding Services provided by Restaurants .I would like to clarify regarding certain issues:

Issue No 1 : Is the VAT imposed by States required to be included for the Purpose of Service Tax?

Answer: For the Purpose of Service Tax State VAT has to be excluded from the Taxable Value

Issue No 2: Is the Serving of Food And/or Beverages by way of Room Service liable for Service Tax?

Answer: When the Food is served in the Room Service Tax cannot be charged under the Restaurant service as the service is not provided in the premises of the air-conditioned restaurant with a licence to serve Liquor.Also the same cannot be charged under the short term accommodation head if the bill for the food will be raised separately and it does not form the part of declared Tarrif.

Issue No: 3 Will the other services provided by restaurant in other parts of Hotel such as Swimming Pool etc attached to a restaurant be also liable to Service Tax?

Answer: Any Services provided by a restaurant in other parts of the Hotel attached to a restaurant are also liable for Service Tax as these area also become the extensions of the Restaurant.

Issue No: 4 If there are more than one restaurants belonging to the same entity in a complex ,out of which only one or more satisfy both the criteria relating to air conditioning and licence to serve liquor ,will the other restaurants be also liable to pay Service Tax?

Answer: Service Tax is leviable on the restaurants which satisfies two conditions:

1) It should have the facility of air conditioning in any part of establishment .

2) It should have licence to serve alcoholic beverages .

If within the same entity there are more than one restaurants which are clearly demarcated and separately named the ones satisfying both the conditions is only liable to pay service Tax.