Effect of Budget 2013-14 amendments under Service Tax on ˜Restaurants™

Applicability :
As per Notification no. 25/2012 dated 20^th June 2012 under Service Tax regulations, Services provided in relation to serving of food or beverages by a restaurant, eating joint or a  mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a license to serve alcoholic beverages, were exempted from the levy of service tax so far.

However, this exemption will now available only to non air-conditioned or non-centrally air-heated restaurants.  The dual requirement that it should also have a license to serve alcohol is being done away with now. Therefore, service tax will be leviable on taxable services provided in restaurants with air-conditioning or central air heating in any part of the establishment at any time during the year, whether the same serves liquor or not.

No specific definition of Restaurant has been prescribed under the service tax regulations containing any limitation to any area, no. of seats or otherwise.  It covers all restaurants, eating joints or a mess.  Therefore, it seems to cover almost all the following categories of restaurants, having the facility of air conditioning or central air heating in any part of the establishment at any time during the year :
1)    Restaurants
2)    Cafes
3)    Food Courts
4)    Food Kiosks
5)    Pubs etc.

Effective Date :

The effective date of the above mentioned amendment shall be 1^st April 2013.

Registration Requirements :

All taxable service providers are required to get registered with the service tax authorities in case the aggregate taxable turnover exceeds Rs. 9.00 lacs (Rs. Nine Lacs) in any financial year.  The service tax is required to be charged as and when the taxable turnover exceeds Rs. 10.00 lacs (Rs. Ten Lacs) in any financial year.

In other words, no registration is required up to the taxable turnover of Rs. 9.00 lacs.  The registration gets triggered upon achieving the turnover of Rs. 9.00 lacs and the service tax is required to be levied upon exceeding the turnover of  Rs. 10.00 lacs.

Rate of Service Tax :

• Rate of Service Tax would be 40% of 12.36% i.e. 4.944% of the total bill amount including Service charges but excluding VAT levied on food / beverages served.

Example : 

Food & Beverages	Rs. 1,000/-
VAT @ 14.50%	Rs. 145.00 (VAT rate may differ from State to State)
Total	Rs. 1,145.00
Service Charges	Rs. 100/-
Total amount before Service Tax	Rs.1,245/-
Service Tax Rate	40% of 12.36%
Net Service Tax Rate	4.944%
Total amount chargeable for Service Tax	Rs. 1100/- (Total amount before Service Tax less VAT )
Total amount of Service Tax	4.944% of Rs. 1100/- = Rs. 54.38
Total amount payable by customer	Rs. 1,299.38 (Rs.1,245 + Rs. 54.38)

Service Tax Deposit :

• Service tax should be deposited monthly by the 6^th of every month, if deposited electronically otherwise by 5^th of every month.

Service Tax Returns :

• Half Yearly returns are required to be submitted as per the following details :
• For the period from April September by 25^th October every year
• For the period from October March by 25^th April every year

Penalty :

• Any person, who is required to take registration, fails to take registration in accordance with the requirements shall be liable to a penalty which may extend to ten thousand rupees.