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Service Tax on AC Bar Restaurants & Hotels is Unconstitutional – Kerala HC |
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Service Tax on AC Bar Restaurants & Hotels is Unconstitutional – Kerala HC |
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Service Tax on AC Bar Restaurants & Hotels is Unconstitutional – Kerala HC The Hon’ble Kerala High Court has held that the levy of Service Tax on AC Bar Restaurants and Hotels providing short term accommodation as Unconstitutional and beyond the Legislative Competence of the Parliament. The Finance Act, 2011 inserted “Restaurant service” and “short-term accommodation service” within the ambit of taxable service w.e.f. May 1, 2011, the relevant extract of which is as under: Section 65(105)(zzzzv) of Chapter V of the Finance Act, 1994 (“the Finance Act”) pertaining to AC Bar Restaurants as under: “Any Service Provided or to be provided to any person, by a restaurant, by whatever name called, having the facility of air-conditioning in any part of the establishment, 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, in its premises;” Section 65(105)(zzzzw) of the Finance Act pertaining to Short term accommodation service as under: “Any Service provided or to be provided to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months;” The constitutional validity of the aforesaid amendment as made by the Finance Act, 2011 was challenged before the Hon’ble Kerala High Court by “the Kerala Classified Hotels and Resorts Association” vide WP(C) 14045 of 2011 and other Hotels and Restaurants contenting that the aforesaid levy by the Central Government transgress upon the subject matter falling under Entry 54 (Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I) and Entry 62 (Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling) respectively of the List II (State List) of the Seventh Schedule of the Constitution and therefore beyond the legislative competence of the Parliament. The Hon’ble High Court at the time of admission had granted stay against any coercive steps for recovery of service tax or against any proceedings for imposing penalty for a period of 2 months, which was later extended until further orders.The matter was finally heard by the Honourable High Court and has pronounced the judgment on July 3, 2013 allowing the writ petitions and held:-
Food for Thought: This judgement of the Hon’ble Kerala High Court is valid even post Negative list regime of Service tax and will open up new debate & litigation across the Country on the following points:-
Goods and Services Tax (GST) is going to resolve all these double taxation issues. Let’s pray for early GST in the Country. Bimal Jain Co-Chairman of Indirect Tax Committee of PHD Chamber of Commerce Member of Indirect Tax Committee of FICCI/ Assocham Special Invitee of Indirect Tax Committee of ICAI/ICSI Mobile: +91 9810604563 Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon. Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.
By: Bimal jain - July 9, 2013
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