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THE TELANGANA TAX ON LUXURIES ACT, 1987 HISTORICAL BACK GROUND
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The Telangana Tax on Luxuries in Hotels and Lodging Houses Act, 1987 (Act No.24
of 1987) was enacted mainly to mobilise additional resources to the State. In the
Statement of Objects and Reasons, it has been stated as under:
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STATEMENT OF OBJECTS AND REASONS
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"With a view to mobilise additional resources and to compensate the loss of revenue
due to exemption from payment of sales tax by hotels up to a total turnover of Rs.2
lakhs in a year and also to levy tax on the richer income group of the society,
the Government have decided to levy and collect a tax at a rate of 10% on the charges
in respect of any luxury provided in a hotel to every person when the rate of charge
per person per day is Rs.60/- or more. This Bill seeks to give effect to the above
decision."
Subsequently, by Act No.28 of 1996, the levy was extended we.f.1.8.1996 even to
corporate hospitals. Section 3 which is the charging section has been substituted.
By the same Act the levy was extended to tobacco products specified in the Schedule.
Cigarettes and chewing tobacco products were included in the said Schedule.
By Ord. No.2 of 1997 the rate of tax on chewing tobacco products was increased from
10% to 50%. The reasons for the steep increase as set out in the L.A.Bill No.6 of
1997 are as under:
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STATEMENT OF OBJECTS AND REASONS
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The Supreme Court of India in Abdul Kadar Vs. State of Kerala (AIR 1976 SC 182)
has held that tobacco products have been found to have deleterious effect upon health
and a tax on tobacco has been recognised as a tax in the nature of a Luxury tax.
Accordingly, luxury tax is being levied at the rate of 1 0 passe in the rupee on
chewing tobacco preparations, commonly known as Khara, Masala, Kimam, dokta, zarda,
sukha and surthi..The aforesaid chewing preparations are considered to be injurious
to health and therefore Government have decided to curb their sales and consumption
in the State. Therefore, Government have decided to impose a heavy dosage of tax
at the rate of 50 paise in every rupee at the first point of supply in the State.
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