The Expenditure Tax Act, 1987 is an
Act of the
Parliament of India
The Parliament of India (International Alphabet of Sanskrit Transliteration, IAST: ) is the supreme legislative body of the Republic of India. It is a bicameralism, bicameral legislature composed of the president of India and two houses: the R ...
. It applies to any charges incurred by an individual and in the event that these charges are implied to be chargeable expenditure. The Act is applicable to all the States and Union Territories in India.
History
The expenditure tax was first introduced by
T. T. Krishnamachari (then
Finance Minister
A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation.
A finance minister's portfolio has a large variety of names around the world, such as "treasury", " ...
) in 1957. After being abolished in 1962 by
Morarji Desai
Morarji Ranchhodji Desai (29 February 1896 – 10 April 1995) was an Indian independence activist and politician who served as the 4th Prime Minister of India between 1977 to 1979 leading the government formed by the Janata Party. During his ...
, it was brought again in 1964. It was finally abolished in 1966 after which Chaudhary
Charan Singh
Chaudhary Charan Singh (23 December 1902 – 29 May 1987) served as the 5th Prime Minister of India between 28 July 1979 to 14 January 1980. Historians and people alike frequently refer to him as the 'champion of India's peasants.'
Charan S ...
tried to bring it again in 1979 but failed.
Expenditure Tax Act
The Expenditure
Tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
Act, 1987 governs the taxation process associated with the chargeable expenditure incurred by an individual in a certain hotel or restaurant.
The Act applies to chargeable expenditure provided the following criteria are fulfilled
# If the charges are incurred in a hotel where the room charges for an accommodation is INR 3000 per day or in excess of this amount
# The charges are incurred in a restaurant
In case of the rooms charges the Assessing Officer of the Income Tax Department has the freedom to decide whether the charges are mentioned in the right manner along with other respective charges such as food, drinks, and other services. In the event that a discrepancy is found in the breakup of charges the Assessing Officer is given the right to decide on the amount required to be charged as room charges.
Value of Expenditure Tax Applicable
The Expenditure Tax taxable under this Act is charged at
* 10% (Ten percent) of the charges incurred at a hotel as long as the hotel is as per Clause (1) of Section 3 of the
Income Tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
Act of 1961
* 15% (Fifteen percent) on charges incurred in a restaurant as long as the restaurant is as per Clause (2) of Section 3 of the Income Tax Act of 1961.
Collection of expenditure tax
In the event that a hotel provides the services mentioned in Sub Clauses (a) to (d) of Clause (1) of Section 5, the amount of Expenditure Tax is to be recovered from the person carrying on the business.
In the event that a hotel provides the services mentioned in Sub Clause (b) or Sub Clause (d) of Clause (1) of Section 5, the amount of Expenditure Tax will be recovered from the other person referred to.
In the event that a restaurant as per Clause (2) of Section 3 and the services it renders are as per Clause (2) of Section 5. And said services are provided by the restaurant or the person carrying on business in the restaurant or by the other person, the
Expenditure
An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is a ...
Tax will be collected at the rate specified in Clause (b) of Section 4.
References
{{Taxation in India
Indian tax legislation
Acts of the Parliament of India 1987
Expenditure