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September 2014

2014 (35) S.T.R. 28 (Uttarakhand) Valley Hotel & Resorts vs. Commissioner of Commercial Tax, Dehradun

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Whether VAT is leviable on amount, leviable to service tax, on presumptive basis with respect to restaurant services?

Facts:
The revisionist was engaged in the business of hotel providing lodging, boarding and restaurant services. Food served in the restaurant was liable for VAT vide Uttarakhand VAT Act, 2005 which was duly discharged. From 1st July, 2012, Service tax was leviable on 40% of the bill amount vide Rule 2C of the Service Tax (Determination of Value) Rules, 2006. The revisionist, hence, made an application to VAT authorities requesting not to charge VAT on such 40% of billed amount which would suffer a burden of service tax. However, Commissioner as well as Tribunal of Commercial Tax rejected the application

Held:
Value Added Tax can be imposed on sale of goods and not on service. Union Government, which is the competent authority to impose service tax, has imposed service tax on restaurant services which is not challenged by the State. VAT cannot be imposed on the element of service. Thus, the revision was allowed.

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