Taxability of Bundled service:
(a ) If various elements of such service are naturally bundled in the ordinary course of business ,it shall be treated as provision of the single service which gives such bundle its essential character. Example-1: A hotel provides a 4-D/3-N package with the facility of breakfast and /or say laundering of 3-4 items of clothing free of cost per day .This is a natural bundling of service .The service of hotel accommodation gives the bundle the essential character and would, therefore ,be treated as service of providing hotel accommodation.
Example-2 : A 5 star hotel is booked for a conference of 150 delegates on a lump sum package with the facilities of Accommodation for delegates ,Breakfast for delegates ,Tea and coffee during conference ,Access of fitness room for delegates ,Availability of conference room, business centre etc.
As is evident a bouquet of services is being provided, many of them chargeable to different effective rates of tax. None of the individual constituents are able to provide the essential character of the service. However, if the service is described as convention service it is able to capture the entire essence of the package. Thus the service may be judged as convention service and is chargeable to full rate.
However, it will be fully justifiable for the hotel to charge individually for the services in a bona-fide manner.
(b) If various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.
For Example a house is given on rent one floor of which is to be used as residence and other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for residence is in negative list while renting for non-residence use is taxable. Hence ,entire bundle of letting out of 2 floors would be treated as renting of commercial property.