All hotels and restaurants throughout the country will be closed on April 29 in protest against the levy of service tax on air-conditioned restaurants announced in the Union Budget for 2013-14. A decision to this effect was taken at a meeting of the hotel associations of all States held in Mumbai on April 15.

Talking to newspersons here on Saturday, M. Venkadasubbu, president, R. Srinivasan, secretary and P.G.R. Ganesan, treasurer of the Tamil Nadu Hotels Association, said that Article 366, section 29 (f) of the Constitution of India defines supply of food and drinks in hotels as ‘deemed sales’ and empowers the State governments to collect sales tax on the total value of sales. All the State governments were levying value added tax (VAT) on the entire value of the sales.

Under these circumstances, the Central government is levying 12.36% service tax on 40% of the sales turnover of air-conditioned restaurants. “This amounts to double taxation, and an anomalous situation where a customer has to pay tax on 140% of the sale value of the food consumed by him”, he said.

Mr. Venkadasubbu said that when Manmohan Singh was the Finance Minister, the Central government levied expenditure tax on air-conditioned hotels in 1991, but the same government withdrew the tax in 1992 on the grounds that it affected the common man. When Pranab Mukherjee was the Finance Minister, the Central government announce a levy of 12.36% service tax on hotels and restaurants which served food and liquor in the 2012-13 budget.

The present Finance Minister P. Chidambaram has in the recent budget removed the word liquor and introduced a levy of 12.36% service tax on all air-conditioned hotels with effect from April 1, 2013. This showed the contradictory stands taken by successive Finance Ministers.

Mr. Venkadasubbu said that the problem of double taxation was discussed at the Mumbai meeting, and the office-bearers and representatives of the hotel owners’ associations of several States and federations took a unanimous decision to observe a nation-wide bandh on April 29 since the levy of service tax affected the common man.

Since Mr. Chidambaram declined to entertain their plea for withdrawal of the tax when the office-bearers of the associations submitted a memorandum to him on March 23, the associations have sought an appointment with the Prime Minister to press their demand for withdrawal of the service tax.

If there was no positive response from the government, the hotels would go ahead with the bandh.