NO SERVICE TAX ON AC BAR RESTAURANTS AND ON HOTELS PROVIDING SHORT ACCOMODATION

The High Court of Kerala declares the levy of service tax on AC bar restaurants and on hotels providing short accommodation as unconstitutional and beyond the legislative competence of Parliament.

The Kerala High Court on Wednesday held that the Centre’s decision to impose service tax on food and beverages supplied by air-conditioned restaurants with licences to serve alcoholic beverages in the 2011-12 budget was beyond the legislative competence of ParliamenJustice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain bar hoteliers.t. Justice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain Bar Hoteliers.

Service Tax was imposed on Air conditioned restaurants whereby the service provided or to be provided, by whatever name called, at any time during the financial year which has licence to serve alcoholic beverages, in relation to serving of food or beverage including alcoholic beverages or both and on Renting of hotels, inns, guest houses, clubs, campsites or other commercial purposes meant for residential or lodging purposes.

The petitioners contended that Article 366 section 29(f) of the Constitution defined supply of food and drinks in hotels as deemed sales and empowered the State Government to collect Service Tax. Therefore the Centre has no authority to collect service tax.

The Court ruled that the State Governments alone has the legislative competence to enact a law imposing a tax on the service elements forming part of sales of goods. The court also ordered that if any payments have been made by Petitioners on the basis of impugned clauses, they are entitled to seek refund for the same.The petitioners contended that Article 366 Section 29 (f) of the Constitution defined supply of food and drinks in hotels as ‘deemed sales’ and empowered the State governments to collect sales tax on the total value of sales. Therefore, the Centre has no authority or power to collect such service tax.Justice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain bar hoteliers.Justice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain bar hoteliers.Justice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain bar hoteliers.

This Article has been Shared by Student of ICAI Palak Aggarwal. She Can be reached at aggarwal.palak2809@gmail.com

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