Lok Sabha Question No. 171 (STARRED), answered on 2017-03-14
Subject: Hotel Service Charges
Ministry: CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION
Asked by: BAIJAYANT "JAY" PANDA, PINAKI MISRA

## Government of India Ministry of Consumer Affairs, Food and Public Distribution Department of Consumer Affairs

## LOK SABHA

## STARRED QUESTION NO. *171

TO BE ANSWERED ON 14.03.2017

## HOTEL SERVICE CHARGES

## *171.   SHRI BAIJAYANT JAY PANDA:

SHRI PINAKI MISRA:

## Will the Minister of CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION miHkksDrk ekeys] [kk| vkSj lkoZtfud forj.k ea=h be pleased to state:

- (a) whether  inspite  of  the  advisory  issued  by  the  Government  to  desist  from  levying  service charges in the range of 5%- 20% in the food bill as it is an unfair trade practice, majority of hoteliers  continue  to  levy  service  charges  and  if  so,  the  corrective  steps  taken  by  the Government to ensure that the hotel industry complegies with the advisory;
- (b) whether  the  industry  associations  have  worked  out  a  proposal  and  submitted  the  same  to Union Government which would ensure the best interests  of  the  consumers  and  if  so,  the details thereof;
- (c) the  nature  of  the  rule  under  which  the  service  tax  is  levied  by  the  Hotels/  Restaurants  on service and sale of their products to the customers; and
- (d) the present status of the service tax levied by the Hotels and Restaurants?

## ANSWER

## miHkksDrk ekeys] [kk| vkSj lkoZtfud forj.k ea=h ¼Jh jke foykl ikloku½

THE MINISTER OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION (SHRI RAM VILAS PASWAN)

(a) to  (d) :

A Statement is laid on the Table of the House.

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## STATEMENT REFERRED IN REPLY TO PARTS (a)  TO (d) OF LOK SABHA STARRED QUESTION NO.*171 FOR 14.03.2017 REGARDING HOTEL SERVICE CHARGES.

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- (a)  & (b)  :  The Ministry examined the matter of compulsory charging of service charges by hotels and restaurants, and issued an advisory in December 2016 to the State Governments. The advisory aims to sensitize the hotels and restaurants in the state regarding the provisions of the Consumer Protection Act, 1986  relating  to  unfair  trade  practices,  and  also  explains  the  legal  options  available  to  the  aggrieved consumers to approach Consumer  Fora  of appropriate jurisdiction. States were requested for dissemination of information in this regard. After issuance of the advisory, some more complaints have been  received  through  National  Consumer  Helpline,  on  which  the  complainants  were  provided  with guidance  on  approaching  consumer  fora  of  appropriate  jurisdiction  to  redress  their  disputes.    The Ministry subsequently held a meeting with the Hotel and Restaurant Associations in January 2017, to discuss the issue and advised them that they should come up with a proposal for resolution of the issue. No proposal has yet been received from the Hotel and Restaurants Associations.
- (c) & (d)   :  Service Tax is levied on Services provided by Hotels/Restaurants as per the provisions of section  66B  read  with  section  66D  of  the  Finance  Act,  1994,  at  the  rate  of  14%  on  the  value  of  the services.  Under Service Tax (Determination of Value) Rules, 2012, the value of service portion in any activity wherein goods being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity at a restaurant or as outdoor catering has been specified as percentage of the total amount charged for such supply, in terms of the following table.

1.

2.

| S.No.   | Description                                                                                                                                                                                                       |   Percentage of the total amount |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|
|         | Service Portion in an activity wherein goods, being food or any other article of human consumption or any drink(whether or not intoxicating) is supplied in any manner as a part of the activity, at a restaurant |                               40 |
|         | Service portion in outdoor catering wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of such outdoor catering   |                               60 |

Further, vide notification no. 25/2012-ST, dated 20.6.2012 (as amended), exemption from service tax has been granted for services provided in relation to serving of food or beverages.

-  by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;
-  by a canteen maintained in a factory covered under the Factories Act, 1948(63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.

In addition to the above, Swachh Bharat Cess @0.5% and Krishi Kalyan Cess @ 0.5% is also levied on the value of the taxable services.

*****