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VAT: compounding option for hotels and restaurants

Special Correspondent

CHENNAI: Four turnover-based slabs of compounding option have been provided for in the case of hotels, restaurants and sweet stalls for payment of tax in lieu of value added tax (VAT) under the Tamil Nadu Value Added Tax Act, 2006, presented in the State Assembly on Tuesday.

The compounded tax rate (per annum) will be as follows: Total turnover between Rs. 10 lakh and Rs. 25 lakh: tax of Rs. 12,000 per year; between Rs. 25 lakh and Rs. 30 lakh - Rs. 24,000; between Rs 30 lakh and Rs 40 lakh - Rs 36,000; and turnover in excess of Rs 50 lakh - Rs. 48,000.

The tax is applicable on sale of unbranded foods, including sweets, savories, unbranded non-alcoholic beverages served in or catered indoors or outdoors by hotels, restaurants, sweet stalls, clubs and caterers.

For the purpose of computing the total turnover, the purchase turnover liable for tax (under Sec.12 of the Act) is to be added to the sales turnover.

Where hoteliers etc do not exercise the compounding option, the VAT rate will be 12.5 per cent of taxable turnover in the case of recognised star hotels and four per cent in the case of others.

Salt, edible oil exempt

Goods totally exempted from VAT include (apart from those coming under additional excise), items of common consumptions like edible oils (in the case of sale by dealers whose total turnover on the sale of these goods does not exceed Rs. 300 crore per year), appalam, pappadam etc, salt (except in the case of industrial use), saree falls, vermicelli, writing instruments, aquatic feed, agricultural implements (manually operated or animal driven), products of the palm industry, pulses and grams (in the case of dealers with turnover not exceeding Rs. 300 crore a year in these items) and unbranded masala powder.

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