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Sale Price in Banquet Hall under MVAT Act, 2002

G. G. Goyal
Under Maharashtra Value Added Tax Act, 2002, (MVAT Act), tax is levied on the ‘sale price’. There are situations where the transactions are composite and only part of it would be liable to VAT. In case of Works Contract the situation is clear due to judicial pronouncements. However, there are new types of transactions coming up for determination of ‘sale price’. One such instance is sale price, for the purpose of MVAT Act, in case of charges for Banquet Hall. Banquet halls normally arrange programs as per requirement of clients. Entire arrangement includes various services including serving of food and drinks. For example, if a marriage function is arranged in a banquet hall, then there will be arrangement for a stage, furniture, decoration, music, etc. and also supply of food and drinks.

Banquet Hall, a composite transaction

In case of banquet hall, the service provider i.e. hotels etc., are liable to pay service tax. Simultaneously there being supply of food and drinks, VAT is also applicable. An issue arises as to on what amount VAT is payable. One view can be that the entire charges are liable to VAT. Other view can be that only that portion of price, which is relating to food and drinks, can be liable to VAT.

Determination of disputed question (DDQ) in caseof Tip Top Enterprises
The dealer, M/s. Tip Top Enterprises, filed an application for determination, before the Commissioner of Sales Tax, to get the issue of ‘sale price’ for banquet hall under the MVAT Act decided. In the DDQ dated 25-05-2009, the learned Commissioner of Sales Tax, rejecting all the arguments of the dealer, held that the whole amount charged by the dealer (banquet hall) is liable to VAT.

Decision of Tribunal in above case
The matter went to Maharashtra Sales Tax Tribunal by way of appeal no. 41 of 2009. In the appeal, on behalf of appellant, following arguments...

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