VALUE ADDED TAX (VAT)
- All Members of the Association in Maharashtra (No.: 14-13/598/2005 Dated :April 01, 2005)

LUXURY TAX :
Effective 1st April, 2005, the Luxury Tax rate structure will be as under:

Room Rate Per Day	Rate of Tax
Up to Rs.199/-	Nil
Rs.200/- to Rs.1,199/-	4%
Rs.1,200/- and above	10%

For the period 1st May, 2004, to 31st March, 2005, the rate of Luxury Tax will be 6%, as advised in August, 2004. Necessary circular granting administrative relief is expected to be issued by the Finance Department very soon, and a copy thereof, will be forwarded to you, when received. Your Assessment for the year 2004-2005 will then be done on that basis.
Efforts are still on to convince the Government to continue the rate of Luxury Tax for the year 2005-2006 at 6%. However, as no Notification has been issued by the State Government so far, members are advised to follow the above rate structure.

VALUE ADDED TAX (VAT) :
VAT has been introduced in Maharashtra with effect from 1st April, 2005, and the food and beverage turnover is now subject to VAT.
As per the new schedule under the Maharashtra VAT Act, there are 49 items under schedule ‘A’, which are subject to Nil rate of Tax. Some of these products used in Hotels and Restaurants, as input or output, are as under :

Bread (excluding Pizza Bread), in loaf, rolls or in slices, toasted or otherwise except when served for consumption.

Cereals and pulses (during the period from 1st April 2005 to 31st March 2006) in whole grain, split, or broken form:Other than those to which any other entry in this schedule or any other Schedule applies.

Curd, Lassi, butter milk and separated milk except when served for consumption.

Electricity.

Firewood.

Fresh vegetables and potatoes, sweet potatoes, yam (elephant’s foot), onions, fresh Fruits excluding wet dates.

Garlic and ginger.

Meat, flesh of poultry and sea food, including fish, prawns, lobsters, crabs and shrimps except when sold in frozen state or in a sealed container; eggs in shell.

Milk, that is to say, animal milk in liquid form except when served for consumption and excluding –     (a) condensed milk whether sweetened or note, and     (b) Milk containing any ingredient and sold under a brand name.

Poha Lahya and chirmura.

Tender green coconut.

Unprocessed salt.

Water other than –     (a) aerated, mineral, distilled, medicinal, ionic, battery, dematerialized water, and     (b) water sold in sealed container

There are three items under Schedule ‘B’, which attract VAT rate of 1%. These are products made out of precious metals, gold, silver etc.
There are 106 items under Schedule ‘C’, which attract the rate of 4%. Some of these products used in Hotels and Restaurants as input or output are as under :

Under Schedule ‘D’ there are 10 items, which attract the rate of Tax at 20% and above. These includes the following products, which are used in Hotel Industry :

Foreign liquor as defined from time to time in rule 3(6) (1) of the Bombay Foreign Liquor Rules, 1953. - Rate 20%.

Country liquor, as defined in Maharashtra Country Liquor Rules, 1973. – Rate 20%.

Liquor imported from any place outside the territory of India as defined, from time to time, in rule 3(4) of the Maharashtra Foreign Liquor (Import and Export) Rules, 1963. - Rate 20%.

High Speed Diesel Oil, - Rate 34% + One rupee per Litre.      (a) when delivered.          (i) To a retail trader for trading from a place of business situated within the geographical limits of the             Municipal Corporations of the Brihan Mumbai, Thane and Navi Mumbai; and         (ii) to a person other than retail trader having place of business situated within the geographical limits of the            Municipal Corporations of the Brihan Mumbai, Thane and Navi Mumbai.     (b) in circumstances other than those mentioned in clause (a) above.

Any other kind of Motor Spirit, - Rate 30% + One Rupee per Litre.      (a) when delivered, -         (i) To a retailer for trading from a place of business situated within the geographical limits of the Municipal             Corporations of the Brihan Mumbai, Thane and Navi Mumbai; and         (ii) To a person other than the retailer having place of business situated within the geographical limits of the             Municipal Corporations of the Brihan Mumbai, Thane and Navi Mumbai;     (b) When delivered in circumstances other than those mentioned in clause (a) above.

All the other items are subjected to rate of tax at 12.50% (Schedule ‘E’). Food, beverages and other products sold by Hotels and Restaurants, which are not stated in the aforesaid Schedule ‘A’ to ‘D’ are, therefore, subject to the VAT rate of 12.50%.
Members are requested to start levying VAT on their bills at the prescribed rates as mentioned in Schedule ‘A’ to ‘E’ as stated above.

Kindly note that in terms of the VAT Act, existing dealers will be automatically registered, while new dealers will have to obtain a Tax Payer Identification No. (TIN).

Any Hotel or Restaurant having a turnover of less than Rs.5.00 Lacs is not subjected to VAT, and it will also not get the credit for VAT charged on its inputs.

The State Government is also notifying a composition scheme for hotels and restaurants having a turnover upto Rs.50.00 Lacs. Such Hotels and Restaurants will be paying the VAT at the notified rate and they will not be eligible to take credit for the VAT charged on their inputs. The rate is expected to be known in the next few days.

Members are requested to comply with the new Tax system, as stated above.

Sunder N. Awatramani
President.