The Delhi high court on Saturday has struck down a central tax on shortterm accommodation of less than three months in a hotel, inn, guest house, club or campsite as "unconstitutional and invalid".
A bench of Justice S Muralidhar and Justice Najmi Waziri said a seperate "luxury tax" is already being levied by states on such accomodations and central government can't encroach on the preseve of states in this regard.
The ruling will reduce the tax burden on customers whoavail such accomodation in the city since they won't have to pay both luxury and service tax. However, the bench upheld another levy imposed by the Centre as service tax on food and beverages served in airconditioned restaurants and hotels across the country.
The court's decision came on the petition of a National Federation of Hotels and Restaurants Association of India, city based luxury hotel Leela Palace and restaurant Rodeo challenging the levy of both central taxes on the ground that Parliament can't legislate on these two aspects.
The petitioners also pointed out that due to Centre's encroachment, every part of the transaction of supply of food in a restaurant or hotel is now amenable to service tax levied by it. But the bench partially disagreed with the association and other hotels.
It held that Parliament has full competence "to enact section 65 (105) (zzzzv) of the Finance Act with a view to bringing the service component of the composite contract of supply of food and drinks by an air-conditioned restaurant within the service tax net." It also pointed out that in case of catering there is no overlap between a state imposed tax and one levied by the Centre.
As regards levy of service tax on accommodation, the court said, "It is not merely an overlap of luxury tax and service tax as far as accommodation provided in hotels is concerned, it is in fact the same levy but by different statutes, one enacted by the state and the other by the Union. This is indeed an instance of encroachment by the Union into a field that is completely covered by a state legislation."
A bench of Justice S Muralidhar and Justice Najmi Waziri said a seperate "luxury tax" is already being levied by states on such accomodations and central government can't encroach on the preseve of states in this regard.
The ruling will reduce the tax burden on customers whoavail such accomodation in the city since they won't have to pay both luxury and service tax. However, the bench upheld another levy imposed by the Centre as service tax on food and beverages served in airconditioned restaurants and hotels across the country.
The court's decision came on the petition of a National Federation of Hotels and Restaurants Association of India, city based luxury hotel Leela Palace and restaurant Rodeo challenging the levy of both central taxes on the ground that Parliament can't legislate on these two aspects.
The petitioners also pointed out that due to Centre's encroachment, every part of the transaction of supply of food in a restaurant or hotel is now amenable to service tax levied by it. But the bench partially disagreed with the association and other hotels.
It held that Parliament has full competence "to enact section 65 (105) (zzzzv) of the Finance Act with a view to bringing the service component of the composite contract of supply of food and drinks by an air-conditioned restaurant within the service tax net." It also pointed out that in case of catering there is no overlap between a state imposed tax and one levied by the Centre.
As regards levy of service tax on accommodation, the court said, "It is not merely an overlap of luxury tax and service tax as far as accommodation provided in hotels is concerned, it is in fact the same levy but by different statutes, one enacted by the state and the other by the Union. This is indeed an instance of encroachment by the Union into a field that is completely covered by a state legislation."
Comments
Post a Comment