HC questions centre on huge service tax in hotel bills | delhi | Hindustan Times
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HC questions centre on huge service tax in hotel bills

Shocked by the amount you are asked to pay as various taxes in Delhi hotels apart from the food bills? Relax. There could be some relief in store as they are under the the Delhi High Court’s scanner. Harish V Nair reports.

delhi Updated: Apr 06, 2012 00:37 IST
Harish V Nair

Shocked by the amount you are asked to pay as various taxes in Delhi hotels apart from the food bills? Relax. There could be some relief in store as they are under the the Delhi High Court’s scanner.


The court has sought a response from the Centre on a PIL questioning the rationale behind the enormous service tax forced on hotel-goers apart from VAT.

“Even we have observed that the service tax component is quite large in hotel bills... We see that the service tax, plus the VAT itself comes to a big amount. There has to be a rationale. File a reply,” Bench of acting Chief Justice AK Sikri and Justice RS Endlaw told the lawyer appearing for the Centre. The Centre has been asked to file a reply by April 17.

The court was hearing a PIL filed by Federation of Hotels and restaurants. Other petitioners include Leela Palace Hotel and CP’s pub Rodeo. The PIL was filed in November but till now, the Centre has not filed a response despite many notices.

Taking a serious note of it, the hotel federation has urged HC to either stay the tax for the time being or hear the case without any counter from Centre.

The PIL challenges broadening of the service tax net by a amendment made last year in the Finance Act of 1994. Two clauses were inserted that made hotels liable to pay increased service tax. According to the petitioners, the effect of the amendment has been two-fold.

Two transactions have been included in the service tax net. AC restaurants with licence to sell liquor and food are required to pay service tax on sales of food or beverages. This is in addition to VAT liability. Hotels, inns, guesthouses, clubs etc are also liable to pay this tax.

“It is for the state government and its legislature to decide taxes on sale of food and beverages. Parliament has no role in this regard as it falls in the state list as per the Constitution.