FH/1/2012 March 29, 2012 The Managing Director/CEO/Director/partner/General Manager All FHRAI Members CC: All Members of the

Executive Committee All Regional Associations President FHRAI Sub: Applicability of Service Tax w.e.f. 1st April, 2012

Dear Sir/Madam, As members are aware, in the Union Budget 2012-13 the new service tax regime has increased the rate of Service Tax to 12% + 3% Cess (2% Education Cess and 1% Higher Education Cess) It means the net rate of Service Tax is 12.36% which will come into effect from 1st April, 2012. The abatement available for hotels (room) has been reduced from 50% to 40% and Restaurants (A/c Restaurant having licence to serve the liquor) 70% to 60%. It means the hotels having room Tariff of Rs. 1000/- and above has to pay the Service Tax on 60% of Room Tariff @ 12.36% (the net rate of Service Tax comes to 7.416%). For A/c restaurants (having Licence to Service the Liquor) the Service Tax is now applicable on 40% of the Bill @ 12.36% (the net rate of Service Tax comes to 4.944%). Members may please recall that Hotels/Restaurants/clubs are covered under Mandap Keepers for holding social functions such as marriage, conferences and seminars where substantial food is served. It attracts the Service Tax @ 12.36%. The abatement has also been reduced from 40% to 30%. It means the Service Tax is applicable on the 70% of the total bill or the net rate of Service Tax come to 8.65%. Hotels can also claim Cenvat Credit of Input Services. The Taxation Rules have been amended which are given below: 1. 2. date of payment as 'date of credit of amount in bank account' as against normal principal of date of issuance of cheque; and In case of change of rate in case the payment is not received within four days, the changed rate shall apply.

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Place of Supply Rules, 2012 have been proposed to be introduced where two new definitions i.e Taxable Territory and Non-taxable territory has been defined. The Negative services have also been notified. Service Tax Registration and Return simplified. Assessee who have made payment of service tax of more than Rs.25 lacs in previous year to file return on monthly basis. Other assessees to file quarterly return instead of half yearly return Appeal before Commissioner (Appeal) to be filed within 60 days as against 90 days in the past. Commissioner is empowered to appoint any CA/ICWA for conducting Audit of any assessee. Assessee can adjust the excess payment of service tax without any limitation. The requirement of communication to department has been dispensed with. Period of demand under Section 73 increased from one year to 18 months.

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This is for your information please. With best wishes, M D Kapoor Secretary General
__________________________________________________ The Federation of Hotel & Restaurant Associations of India
Regd.Office: B-82, 8th Floor, 23 K.G. Marg, New Delhi - 110001 Tel: 011-40780780 Fax: 40780777 Email: fhrai@vsnl.com Website: www.fhrai.com