Luxury Tax in India

The implementation of GST clearly defines the goods and services that are classified under the ‘luxury items’ category. It has also laid down the tax slab rate to be levied on such goods and services as per their prices, as mentioned in the table below. There are also other parameters that decide the tax slab which will be applicable. For instance, the annual turnover of the business providing luxury goods and services, amenities offered like air-conditioned or non-air-conditioned, among other factors.

Here is a list of approximate Luxury Tax rates levied by hotels and restaurants. However, these rates vary between states and Union Territories:

Below are the Luxury Tax rates levied by hotels and restaurants in India, based on certain parameters:

• Restaurants with a turnover of less than Rs. 50 lakhs will levy a luxury tax of 5%.
• Non-AC restaurants levy luxury tax at the rate of 12%.
• AC restaurants levy the tax at the rate of 18%.
• 5-star restaurants will have to impose a luxury tax of 28%.

The following are the services provided by hotels and restaurants that attract Luxury Tax:

• Services provided to the members of a club like charges, fees, deposit, donation or any other charges as mandated by the State.
• Services offered by hotels to their residents.
• Hotel residents or restaurant customers availing services at in-house gymnasiums, swimming pools, health clubs, spas, beauty parlours, business conference halls, wedding banquet halls, etc.

Commercial Taxes Department or the Excise Department is generally authorised to preside over and oversee the collection of Luxury Tax in all the states in India. These departments are further categorised into different departments in every state to execute the process of imposition and collection of Luxury Tax – VAT, Service Tax, Entertainment Tax, in an organised way.

These departments have improvised on their functionalities in alignment to their set responsibilities. The departments in every state have their independent websites and other channels through which residents of that state can access the necessary form and register their business or themselves. The registration process enables the individual or business owner to pay luxury taxes as applicable to them.

Post the implementation of GST, several indirect taxes has been unified, simplifying the taxation process. Unlike the process of filing commercial taxes, including luxury taxes, every month or on a quarterly basis, GST has standardised the taxation process. The procedure and dates of filing GST is the same for all industries throughout India. Luxury Tax in India has to be paid by the last date of the month succeeding the assessment month.