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FH/1/2012 March 30, 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: Clarification on Applicability of Service Tax w.e.f. 1st April, 2012 Dear Sir/Madam, Greetings from FHRAI!! This is further to our email of 29th March, 2012 on the above captioned subject. As members are aware, in the Finance Bill 2012-13, the rate of Service Tax has been increased from 10% to 12%. The net rate of Service Tax would be 12.36% i.e. 12% Service Tax +3% Cess (2% Education Cess and 1% Higher Education Cess) and would be effective from 1st April, 2012. Abatement: The abatement available for hotels (room) is 50% and Restaurants (A/c Restaurant having licence to serve the liquor) 70%. It means the hotels having room Tariff of Rs. 1000/- and above has to pay the Service Tax on 50% of Room Tariff @ 12.36% (the net rate of Service Tax comes to 6.18%).This would come into force from 1st April, 2012. For A/c restaurants (having Licence to Service the Liquor) the Service Tax is applicable on 30% of the Bill @ 12.36% (the net rate of Service Tax comes to 3.708%). This would come into force from 1st April, 2012. 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%. There is abatement of 40%. It means the Service Tax is applicable on the 60% of the total bill or the net rate of Service Tax comes to 7.416%. This would come into force from 1st April, 2012. Please note that the abatement for hotels/restaurants/Mandap Keepers has been proposed to reduce in the Union Budget 2012-13, as per details given below: Service Description Applicable w.e.f. Proposed abatement

1st April 2012

Present Abatement Hotels -Room Rent (Having tariff of Rs. 1000/- and above) A/c Restaurants( Having Licence to serve the liquor) Mandap Keeper 50%

Service Tax @12.36% 6.18%

(reduced) in the Union Budget 2012-13 (would not be effective till the Finance Bill 2012 is passed) Service Proposed Tax Abatement @12.36% 40% 7.416%

70%

3.708%

60%

4.944%

40%

7.416%

30%

8.65%

This is for your information please. With best wishes, Yours sincerely,

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