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Collection And Recovery Under Expenditure Tax Act

by Varun Advani | 6 March 2013

The Expenditure Tax Act of 1987 states the collection of direct taxes for charges incurred at certain hotels, restaurants and similar establishment. There are certain rules that specify the collection and recovery of this Expenditure Tax and both the Assessees as well as the persons responsible for depositing this amount to into the coffers of the Income Tax Department of India are responsible for the correct payment as per laws laid down by the Income Tax Act of 1961. A series of Clauses, Sub Sections, and Sections of the Act deal with the recovery and collection of this tax amount.

As per the Expenditure Tax Act, in case of expenditure that is incurred in a hotel as per Clause (1) of Section 3, the payment of tax is subject to two scenarios. In the scenario that the said expenditure is incurred with relation to services offered by the hotel as per Sub Clauses (a) to (d) of Clause (1) of Section 5, the person who carries on the business is liable to pay the taxes as specified under the Act. In the second scenario, the person responsible for the payment of tax is any person referred to in Sub Clause (b) or Sub Clause (d) of Clause (1) of Section 5. The rate at which the tax is to be collected by these persons is specified in Clause (a) of Section 4.

In the case of restaurants specified under Clause (2) of Section 3 offering any of the services mentioned under Clause (2) of Section 5, the person operating the business or any other person duly responsible is liable to pay the tax at the rate mentioned under Clause (b) of Section 4. The Expenditure Tax Act also specifies that the entire amount of tax thus collected should be duly deposited to the Central Government by the 10th day of the following month.

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