Section 5 of Expenditure Act, 1987-Clarification regarding collection of expenditure-tax by hotels under the Expenditure-tax Act, 1987

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..... expenditure incurred in certain hotels came into force from 1st November, 1987. The Expenditure-tax Act, 1987, provides for a levy at the rate of 10 per cent. of the "chargeable expenditure" incurred by a person in a hotel. Hotels where such a tax is levied on a person incurring chargeable expenditure are those where the room charges for any unit of accommodation is Rs. 400 or more per day per ind .....

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..... nce of clause (a) of the Explanation below section 5 of the Act, rule 4 of the Expenditure-tax Rules, 1987, prescribes the cases and circumstances where payment in Indian currency obtained by conversion of foreign exchange is deemed to have been made in foreign exchange. One of the cases prescribed in the rule is, where a payment to a hotel is made in Indian currency obtained by conversion of fore .....

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..... rable from the foreign tourists who incur any expenditure in the hotels. The hotels were of the view that in view of sections 7(3) and 15, expenditure-tax was recoverable at the time when a bill was raised in respect of a foreign tourist also. This view is based on the interpretation of section 7 which lays down that the tax collected during any calendar month shall be paid to the credit of the Ce .....

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..... conversion of foreign exchange brought into India through an authorised dealer by a travel agent on behalf of a foreign tourist or a group of foreign tourists, it shall be deemed to have been incurred in foreign exchange. Section 5 of the Act provides that any expenditure which is incurred or payment for which is made in foreign exchange is exempt from payment of expenditure-tax. As such, the Boa .....

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