Service Tax on Restaurant Service, Service Tax

[alok gupta]

Service tax on Restaurant service is imposable when a restaurant has license to serve liquor & any part the restaurant has facility of Air Conditioner. In some restaurants,  the license to serve liquor is granted on day to day basis as per their need. In such case, whether the Restaurant has to collect & pay service tax during those specific days only when they had license to serve liquor or they should collect & pay service tax every day.

Following points may be considered before forming an opinion:-

1-If they collect & pay service tax on specific days only and other days go without tax, then the Restaurant owners may misuse this facility  and collection of tax may become discretionary

2-In case the tax is extracted from customers in no-license-days also then it would be against the preliminary condition of tax imposition stipulated in Act & customers are unnecessarily taxed .

Keeping both the factors in mind, please opine the correct way of tax compliance. 

Posts / Replies

[Naveed S]

Yes, my personal opinion is that the Restaurant has to collect & pay service tax during those specific days only when they had license to serve liquor and they should collect & pay service tax for such days only.

As regards misue of facility by such liquor restaurant owners, well, its the decision of the Government and it should be left to them to decide about it.

Howeverr, at least the Government is getting some part of revenue from such restaurants even if the facility is misused for other days, after all the government has nothing to lose. The intention of the revenie must be to first bring such services under service tax net and then tax them properly in the next few years.

Its just like dropping a small fish in the river to catch the big fish..........

[ALOK GUPTA]

The reply of Mr. Naveed S is not clear, concrete, lawful & enforceable. It appears that he has some reservation with the Governement & soft corner for service tax assessee. Obviously, a jusified & lawful opinion does not come out or actually there is no remedy in this situation. Despite the peoblem remains as it is, I thank him for his attempt. Further, I invite the suggestion of some other learned freinds to resolve this issue.

[MANJUNATH M S]

The qualification for compliance is that it should be Air Conditioned and licence to serve alcoholic beverages.  It is not tax on alcoholic beverages.  Instead of sticking to the days whether it had licence or not it would be advisable that collect tax on all days and remit to the department.  Practically this would be advisable as compliance would be easy.  In any case, the tax portion would go as service tax for the purpose of revenue and the balance will get credited to government account.  The defintion also do not say whether permanent licence or temporary licence.  The requirement is that it should have licence to serve alcoholic beverage.  

In my view it is better tax is collected from the day the restaurant gets its first licence

[Naveed S]

1 ) Yes, honestly i still stand with my personal views quoted above that  the Restaurant has to collect & pay service tax during those specific days only when they take license to serve liquor and they should collect & pay service tax for such days only.

Even otherwise. i fail to understand as to how service tax is required to be paid for the whole round the year, when it is collected only for few days, that is, as and  when license to serve liquor is taken by the restaurant owners. I challenge if there is any such law under indirect taxation wherein Charging for any services that are not provided, is permissible/allowed. It is against the basic right of a citizen (Businessmen) and such Principle not allowable anywhere either in the Constitution of India. 

To make matters more simple and clear, tax should be charged for such days only as and when the license for serving liquor is taken.  If the service tax asesing officer is not satisfied with the details shown in the service tax return provided by the restaurant owners, then he may call for details from the State Excise department as to for how many days in each quarter, the  license to serve liquor were permitted/sanctioned  by them, and thereafter the S.T. Officer should check and verify such details with the days shown in the service tax return and satisfy himself.

3) D.O.F.No.334/3/2011-TRU dated the 28th February, 2011 Para 1.5 of Annexure A therein states that ---- It is not necessary that the facility of air-conditioning is available round the year. If the facility is available at any time during the financial year the conditions for the levy shall be met.  

It means that tax is required to be paid even if the A.C. is not provided round the year, but it never says anything about license. It therfore also contrarily means that  tax is to be pad as and when license to serve liquor is taken during the year.

[ALOK GUPTA]

The manner of verification of proper tax payment by restaurant, as suggested by Naveed S in hi reply dated 13.03.2012, wil result in undue harassment of restaurant owners because the service tax assessing officer would have to cross verify, every time, the dates of grant of liquor service license to them by State Excise Deptt. The corresponding documents of assessee would also be called for in process of cross checking. If every time or after every return such process is repeated by service tax assessing officer, then it would tantamount to harassment of restaurant owners. Such advice is not feasable. Please suggest some justified & rational remedy.

[D madar madar]

D Madar sa

8464947234

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