TaxTMI 
TaxTMI 
27 Oct 2016
Service Tax on renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes has to be charged at the rate of 60% ( i.e. abatement 40%) as per Sr. No. 6 of the Abatement Notification No. 26/2012-ST dt. 20.06.2012. The condition provided for granting an abatement of 40% is written as “same as above”. The relevant extract of Sr. No. 6 of Notification No. 26/2012-ST dt. 20.06.2012, reads as under:
|
Sl. |
Description of taxable |
Percentage |
Conditions |
|
6 |
Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. |
60 |
Same as above. |
The condition mentioned in Sr. No. 5 Notification No. 26/2012-ST dt. 20.06.2012, reads as “CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.” Thus, as per the said condition CENVAT Credit on inputs and capital goods for accommodation services provided by a hotel will not be available; however, they were eligible for CENVAT Credit of service tax paid on input services.
Recently, vide Notification No. 38/2016-ST dt. 30.08.2016, Sr. No. 5A was inserted after Sr. No. 5 in the abatement notification No. 26/2012-ST dt. 20.06.2012. The same reads as under:
|
“5A |
Transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport. |
10 |
CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004.” |
The condition mentioned in Sr. No. 5A, stated supra stipulates that CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004. However, the condition mentioned in Sr. 6 granting the accommodation service providers to pay service tax on 60% remains unchanged, it still reads, “same as above”. Thus, now the effect of insertion of Sr. No. 5A is that no CENVAT Credit of even input service is available for accommodation service providers.
An immediate requirement of amending the condition as laid down in Sr. No. 6 is there to avoid the disallowance of CENVAT Credit of input services taken by accommodation service provider and to avoid unnecessary issuance of show cause notices by the Department.