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INDIA: Service tax to apply to AC restaurants only

India’s Finance Ministry has announced that restaurants without air conditioning facility will not charge any service tax.

It added that that those including air conditioning will charge service tax on 40% of the total bill.

The Ministry stated: “Restaurants, eating joints or messes which do not have the facility of air-conditioning or central air-heating in any part of the establishment are exempt from service tax.”

“In other words, only air-conditioned or air-heated restaurants are required to pay service tax.”

For such restaurants, 60 per cent of the value is to be deducted from the total amount charged while applying the rate of service tax, and tax is to be calculated on the balance 40 per cent, it added.

With the increase in the rate of service tax to 14 per cent from June 1, the tax rate is effectively 5.6 per cent of the total amount charged.

Finance Minister Arun Jaitley in his budget proposed to raise service tax from 12.36 per cent (including education cess) to 14 per cent. The tax is levied on all services, except a small negative list.

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