Sumo Hotels sought financial advice from Mr. Kumar regarding service tax obligations and compliance procedures since their business began in August 2013. Mr. Kumar explained that a 60% abatement applies to food sold, requiring service tax to be paid on the remaining 40%, and detailed the registration and payment processes as well as penalties for non-compliance. The hotel must file returns semi-annually, and failure to do so incurs penalties based on arrears.

1. 1
August 26, 2013
SUMO Hotels started their hotel business and wants some advice about the taxes
they need to pay and rules they need to comply with, so they approached Mr. Kumar
who is financial consultant to seek his advice and to address some queries. Here is
the conversation of SUMO Hotel representatives and Mr. Kumar.
S.R- SUMO Representatives
S.R- Why our business is liable to pay service tax?
Mr. Kumar- Because the serving of food in a restaurant is a composite transaction involving
sale and service. While food is sold, services relate to the use of restaurant space and
furniture, air-conditioning, waiters etc.
From 1st April 2013, service tax is applicable only if the restaurant has the facility of air-
conditioning or central air heating in any part of establishment at any time during the year.
Thus it is irrelevant whether the restaurant has liquor license or not.
S.R- On how much portion of the amount, we are liable to pay the tax?
Mr. Kumar- An abatement of 60% has been provided for the food sold and the rest i.e. 40%
relates to services provided by the restaurant on which you will be liable to pay service tax.
In case of home deliveries no service tax is levied.

2. 2
August 26, 2013
And if you act as outdoor caterer i.e. when you provide food and drink outside the place of
your business than you need to pay tax on 60% of the total amount.
S.R- what all will be included in the “Total Amount”?
Mr. Kumar- It will include:
1. Consideration in money for providing the service.
2. Consideration in money + consideration in any other form
3. Consideration in any form other than money
S.R- Tell us about the procedures and rules we need to abide by?
Mr. Kumar- First of all your hotel needs to get registration.
Registration Process: The person who is liable to pay service tax must make an application
to the Superintendent of Central Excise in Form ST-1. But before registering the person
should make sure that the tax amount has exceeded the basic exemption limit i.e. 10 lakhs
at present.
A person can register when the total value of taxable service exceeds 9 lakhs but can avail
exemption up to amount not exceeding 10 lakhs.
Failure of registration: If the person is failed to file registration he would be penalized Rs
10,000/-.
S.R- Which documents are required at the time of registration?
Mr. Kumar- The following documents are required

3. 3
August 26, 2013
1. Self-certified copy of PAN, (where allotment is pending, copy of the application for
PAN may be given)
2. Copy of MOA in case of Companies
3. Copy of Board Resolution in case of Companies
4. Copy of Lease deed/Rental agreement of the premises
5. A brief technical write up on the services provided
6. Registration certificate of Partnership firm
7. Address proof of the assesse
8. Copy of a valid Power of Attorney where the owner/MD/Managing Partner does not
file the application
S.R- When and How to make payment of Service Tax?
Mr. Kumar- One can pay service tax by filling Form G.A.R. 7 and submit it to the designated
bank. Service Tax can also be paid electronically, using e-payment facility. E- Payment is
mandatory if service paid in previous year was more than 10 lakhs.
If your hotel is a proprietary one or a partnership than the service tax is payable Quarterly.
But if it is of any other form than payment must be done monthly.
The due date for the payment is 5th of the month immediately following the respective
quarter. And if the payment is done electronically than 6th the month immediately following
the respective quarter would be the last date. ). For this purpose, quarters are: April to
June, July to September, October to December and January to March. However,

4. 4
August 26, 2013
payment for the last quarter i.e. January to March is required to be made by 31st of
March itself.
Tax electronically paid should be done before 8 pm on due date. If paid after the
same would be considered paid on next day.
S.R- Can we pay tax in advance so to avoid any penalties?
Mr. Kumar- Yes, As per Rule 6(1A) of Service Tax Rules, 1994, service tax can be paid in
advance to the credit of the central government and adjust the amount so paid against the
service tax which you are liable to pay for the subsequent period. The assesse is
required to intimate the details of the amount of service tax paid in advance to the
jurisdictional superintendent of Central Excise/Service Tax within a period of 15 days of
such payment and indicate the details of the advance payment made, and its
adjustment, if any in the subsequent return to be filed.
S.R- Is it mandatory to file returns? How many times a year we need to do that?
Mr. Kumar- Yes, it is mandatory to fill return even if there is no service tax payable, one
need to fill ‘NIL’ return. Return must be filled half yearly in Form ST-3 within 25 days from
the end of half year. Return for half year ending 30th September and 31st March are
required to be filed by 25th October and 25th April, respectively. The assesse who has paid
service tax previous year exceeding 10 lakhs needs to compulsory file the return
electronically.

5. 5
August 26, 2013
S.R- Is there any penalties imposed for not filling the returns?
Mr. Kumar- Of course! There is penalty of Rs. 500 for delay of 15 days from the prescribed
date. Rs. 1000 when the delay is between 15 and 30 days and Rs. 1000+ Rs. 100 per day
where the delay is beyond 30 days but not exceeding Rs.20000/-
S.R- Is there any specific billing format?
Mr. Kumar- No, there is no specific format but there are certain points that needs to be
included:
1. It should be signed by service provider or any other authorized person.
2. The name, address and registration number of the service provider
3. The name and address of the service receiver
4. Date of raising of invoice
5. Description of the service provided
6. The amount of Service Tax and Educational cess and Higher secondary education
cess charged on service tax etc.
S.R- How we would be able to come up to specific rate of taxation if there is multiple or
bundled services provided?
Mr. Kumar- The rate of taxation must be decided on the basis of the services which shows
pre-dominant color.

6. 6
August 26, 2013
Mohammadali Surti
TY BBA
Indirect Taxation Assignment 2013