POSTED BY August 5, 2013 COMMENTS (329)
ONDo you know that you might have lost thousands of rupees in paying extra money on restaurants bills over last few years, just because you do not understand what does service charge, service tax and VAT actually means and how are they calculated. Most of the times customers take it for granted assuming that hotel must charged it in right manner and as per rules laid down. Lets learn about these 3 concepts today so that next time you pay a hotel or restaurant bill, you exactly know what you are paying for and raise your voice if something is wrong.
Just before the bill arrives, I have this habit of running “guessing competition”. Whoever is with me, I ask him/her – “Guess, what would be the bill amount be around ? Give the range , whoever is close wins !” .
Almost all the time I am very close to the actual amount, but then I am not close to the final amount to pay, because I always forget to consider various tax and charges applicable, which always inflates the bill by 20-30% . Imagine you eat worth Rs 1,000 and pay Rs 1,260 finally ! . You know that feeling :).
So if you look at your bills when you eat at hotels and restaurants, you will see 3 kind of charges namely “service charge” , “service tax” and “VAT” . Lets decode them one by one and see what exactly they are
Service Charge is a charge levied by restaurant for the service provided to customers. This is generally 5%-10% of the bill and restaurant owner is free to charge whatever amount he/she wants as service charge. Its up-to you to decide if you want to eat there or not. The service charge has to be displayed in Menu, only then it can appear in the final bill. If you do not see it on Menu, it means it was not communicated to you and you cant not be charged service charge.
Actually service charges are to be distributed among waiters and staff and its kind of compulsory “tip” to be paid. So if there is service charge on the bill, you are not suppose to tip officially to any one. So don’t feel awkward not paying the tip, because you have already paid it in form of service charge, however most of the hotels and restaurants never tell you this explicitly. However one of the exceptions I know is restaurant called “Barbeque Nation”, I could clearly see it was written in their menu that “We will levy 4% service charge on the final bill, and you are not suppose to tip any one (strictly prohibited), because service charge will be shared among the staff” . The ethics quality was as high as their food quality 🙂
So if your food bill is Rs 1,000 and service charge is 10% , then your final bill will be Rs 1,100 .
The important thing, you should be aware about is how service tax is calculated! . Do you know that, Service tax is only applicable on 40% of the bill amount, not the total amount. As the service tax is around 12.36% at the moment, the final tax you need to pay is only 4.944% (12.5% X 40%) on the bill (inclusive of service charge).
The next important thing you should know is that, only AC restaurant can charge service tax. If there is no AC in restaurant (fully or partially) , they cant charge service tax at all. This service tax goes to Govt of India. The service tax is payable on the bill amount + service charge. So if Bill amount is Rs 1,000 , and service charge was Rs 100 (10%), then your sub total would be Rs 1,100 . And your service tax will be computed on Rs 1,100 (not Rs 1,000). 4.944% of Rs 1,100 will be Rs 54.38 and your total bill after service tax would be Rs 1154.38 . A lot of unprofessional and small restaurants are found to charge service tax on the full bill and most of the customer pay because they have no idea what is wrong and what is right. Here is official Note on service tax
Note – On 3rd Nov 2012 , Bar Council by mistake interpreted that service tax is to be paid only on service charge, and it starting circulating over facebook and emails. But note that it was a mistake and later clarified that service tax is to be charged on 40% of the bill amount also. So dont fall for wrong information . Even some one posted it on our jagoinvestor forum and I myself believed it to be true !, but later decided to investigate it.
VAT is Value added Tax collected by State Govt. VAT is only applicable to the food items which are prepared inside the restaurant, because they “added some value” and then hand it over to you. So make sure you do not pay it on packaged items which are not prepared by Restaurant like Packaged food items, water bottles etc. A lot of times you eat at restaurant and also take a lot of packaged items, in which case VAT should be applicable not on final bill, but only sub total of the food items you consumed.
VAT Charges vary from state to state, but generally lie in the range of 10% – 15% . Like in Maharashtra its 12.5% , and in Karnataka its 14.5% . VAT is to be charged only on the main bill + service charges. It CANT be charged on the amount after service tax. So in the same example we looked about, the final bill after service charge was Rs 1,100 , so VAT at 12.5% will be Rs 137.5. Now total bill amount would be
You can see how various charges and tax can increase your final bills by 25-30% . So next time you pay your bills, just make sure your check, if all the taxes and charges are computed properly and as per rules.
Any personal experiences ?
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thanks for the valuable information but I think the service charge should not be charged in case of taking away. Clarify with the restaurant on this
Yes it should not be .. but then if they still do , the only option for you is to not go ahead with the order !
if we take a food for service to hotel that is food vendor is third party we just take prepare food form him than is it so that food vendor charge is 15% vat and 6% service tax? i m in vat food component shcem please guide
I am not very clear on this
hai sir , service tax applicable in parcel
Yes
When we order something on home delivery basis and on pick up basis, for the same order we get a different bill why is it so??
What do you mean ?
What type of Taxes attract in Mineral Water Bottles in A/c Restaurant.
* “value added tax”
Can they charge VAT twice?
Stating one as “VAT” and another one as “value added atx 58” ??
No , both are exactly same
Sir, Iam working in Restaurant
Can we collect tax on water bottles cost@20/- + taxes
No
Wonderful!! this is really one of the most beneficial blogs I’ve ever browsed on this subject.After read this i get some idea about vat charges thank you for sharing this good info with us.
Thanks for your comment varshinidevi
Please provide bill format for 3 star hotel bill to note tax % of Luxury tax, Vat, Service tax etc., including food items, banqut hall rent and Bar with Aircondition hall in Hyderabad, India
You need to check this with a CA
Can VAT be charged on total amount(ie. FOOD AMOUNT+SERVICE TAX OF 5.8%+SB CESS)? KFC SOUTH CITY KOLKATA have charged vat on all these amount. It will be helpful if you can provide a solution.
It should not be charged on the full amount !
Is service tax no. is necessary to be mentioned in bill or only tin no. is sufficient to collect service tax?????
Service tax number should be mentioned to collect the service tax !
Service Charge is not a Govt levied Charge, so can restaurants impose Service Tax and Vat on Service Charge as well? I dont think so Manishji. Could you please clarify ?
No they cant !
Hi Manish
Greetings for writing this article. I highly appreciate your efforts.
Though one point surely gained my attention, as you have mentioned that VAT is applicable on service charge, my query is that VAT is only applicable on value of goods, and as service charge is not a good, hence VAT should not apply on the service charge portion of the bill.
Kindly enlighten with your comments on the same.
Cheers!
Arnav
Yes, i think you are correct !
Please help me about vat limit on restorent business
Hi deepaj
Thanks for asking your question. However, I dont think I am eligible to answer your query as its either out of scope of my knowledge or its not related to money matter directly
Manish
As per tax rules service tax and vat is not charge on the same amount.The bill amount has to be break up for each tax. But if hotels charge both tax where to complain for same
Can you share the source of this information ?
Can a home delivery restaurant ask for service charge , service tax and Vat ?
I am ordering food online and they use to collect two tax.
Where should i Complain ?
well yes u will be required to pay service charges and vat as vat is mandatory and serivce charge is discretionary.
Yes for service tax, and Tax, but not service charge !
Dear Manish,
From what I know, if food is being delivered from a commercial kitchen (not a restaurant) to a consumer at home,
1. Service tax is not applicable. (even if food is from a restaurant, Service Tax is not applicable)
2. VAT would be 5% if revenue is is between 5 lakhs and 1.5 crores and 14.5% if revenue is more than 1.5 crores.
Please correct me if I am wrong. (Telangana Commercial Taxes)
Hi Ram
We are still researching on this and at this moment we are not 100% sure of the answer.
We will write an article on this and let you know
Manish
Hi..I would like to know Service tax and luxury tax is applicable in guest house in kolkata where in the room tariff is below Rs.1000 but the total sales is more than 30 lac per annum ? Rooms have Tv and Conditioner.
* total sale is more than 10 lakh
Yes, service tax is applicable !
Do we have to pay tax on the home delivery food or take away service? If yes, which tax and what percent shall be paid?
Ideally no for the restaurants which dont have AC . check this for detail https://www.quora.com/In-India-is-it-legal-to-levy-service-tax-on-takeaway-parcel-food-items-from-any-air-conditioned-restaurants
Thanks Manish for Clarification..!!
Why would VAT and Serve Tax apply ?
I am selling lunch dabba prepared at my home. The food is very normally packaged just to make sure it won’t spill over and not much branding. The subscribed customers come to a point and collect their dabbas.
In this case, I don’t think I am giving any service so do I have to pay service tax ?
I am selling the home prepared lunch dabba at a very normal room temperature Zero Rated category. Do I have to pay VAT here ?
Please clarify my doubts. This must be helpful to many people here.
There is no VAT here, but service tax still applies. You are giving SERVICE . This is service as per govt 🙂
However if you are not making more than 10 lacs a year, you dont need to worry !
Hey Manish, That was a very quick reply. Thank you…. but I see you mentioned in some posts below that service tax is not charged on home deliveries and take aways? Now I am confused why I need to pay service tax to home deliveries of homemade food ?
Hi! In many restaurants like mc donalds I am being charged with service tax, vat @14.5 and AGAIN vat @20% and I cannot seem to figure out where the VAT @20% came from. I live in New Delhi. Please reply back asap
Please give a snapshot by uploading it somewhere
I also faced similar issue… 20%vat on vat of 14.5 %…. Ur fb I’d plz
Can the restaurant charge vat on the service charge as well ?
No
Hey, Manish, I think you made a mistake while calculating the VAT charges. VAT has been calculated on both the bill amount and service charge. It is quite contrary to that. It should be charged only on bill amount not on the service charge.Hope you will rectify that. Have a nice day.
Hi, is service Tax and VAT applicable on Home delivery and take away in Maharashtra ? I am planing to start a food startup in pune, only for home delivery . takeaways latter . kindly suggest .
Yes, it will apply
Is there any method to confirm that Taxes collected like Maharastra VAT or Service Tax are actually deposited in respective government treasury or siphoned off by these agencies.
You cant exactly find out, but if someone is collecting that, they will pay it to govt else they will get caught by govt !
Manish I hv been charged 12.5 vat on roti..is it chargable
Yes, why not ?
Any item which is prepared inhouse in restaurant . On that VAT will be applied. Whats the difference between Roti and Pizza as far as taxes are concerned 🙂
Manish
I visited Citrus Hotel Pimpri today at midnight , i had pasta , tea & a packed water bottel , The MRP on the water Bottel was Rs.50 & in the menu card it was rs.49 , but when i recived a bill , it was Rs.99 & then service charge & service tax , so can i complaint that i was charged above MRP & Above the price written in the menu card
Hi guys
Today I went to dominos pizza and found that they are charging 45% of vat and 17% of service tax.. Is this correct? I hope not because in the above blogs I see highest limit is vat is not more than 14.50%. Please provide a clarification.
You need to first check with them and see what is their explaination on this !
These pizzas come under luxury tax. Since all these cheese are imported , I guess that is the reason why they charge heavily.
is service tax applicable on take away-food
No
In a hotel bill if they have not showed about the vat amount and can they give bill only for amount of what we have eaten. Isn’t it violation and evading of vat amount being paid to govt. Can we lodge a complaint about it
Yes, if the VAT registration number is not written on the bill, then you dont need to pay it.
if the restaurant not registered in the service tax & he claimed the service tax is offense so please guide me what is the next procedure for action
You need to complain about him to service tax department
I had 2 beers priced at 320 each. And they added VAT @ 14.50 on total amount 720 . Isn’t it incorrect as beer MRP includes the VAT
If its mentioned already , then they should not charge you VAT seperately !
But VAT is applicable on food only which are prepared in premises ,then how VAT can be charged on beer as they are pre-packaged item ?
No , VAT is not just applicable on food item only!
Hi,
Can you please check this bill? It was a parcel. Is it okay to calculate tax on the added value of a carry bag? Also is it okay to add service tax as it was a parcel?
Food – 155
Carry Bag – 3
Sub Total – 158
VAT 14.5% – 22.91
Service Tax 5.6% – 8.85
Total – 190
Thanks
Yes, service tax should not have been calculated , its a wrong thing
Can vat b charged on a pepsi bottle costing 35 and sold at 60 and vat of 12.5% be charged on rs 60.
Since the bottle always mentions inclusive all taxes
Yes
how can vat be can on mrp when it is clear including all taxes
I prepare pavbhaji a my home and sell it to customers only home delivery. Is VAT, service charge or service tax is applicable??
I think service tax is still applicable !
A restaurant has charged me VAT. But the bill is just a cash bill with no registration and no tin. How can we be sure that they are despoting this with the authorities and not pocketing ?
You cant be sure 🙂 .. you need to talk to them about this ..
Hello Sir,
Faasos charged me 14.5% VAT and 5.6% Service tax on home delivery. Is this correct?
I think with changes in rules, it is correct now
Hello
I had recently parcel some food items the owner told me that VAT is still applicable for the same . and charged me with 5% VAT. Also he charged for the parcel charges. Is this OK ??
Yes, this looks fine to me
To kya sir,Hume sirf 14% ka 40% hi Dena hoga.(hotel aur resturant me)
Dear sir,
if i got the discount in restaurant, what is the base amount for tax calculation. after discount or before tax.
Please clarify
Regards,
Bunty Rana
Mostly the tax would be on the total amount
Dear Sir
Thank for reply but i want know what is base the amount for calculation. i am confused about this. some i time visit in the restaurant they take tax before discount amount. is right ?
Please explain.
Regards
Bunty Rana
I think there is always a debate around this topic, as this is not defined by law.
Hi
Really appreciate your post…but i still have some doubts…i will appreciate if you clear them too….like i being regular visitor of VLCC i questioned them about my bills referring to your post..where they are still charging service tax @ 14.42 on total package ( not as 5.6 % of total package as per your post) ..they simply answered that these post is valid only for food bills but not applicable on beauty services/salon spa etc..so me and other vlcc clients are forced to pay huge amount of money to VLCC as service tax …kindly clear vlcc/ other salon services and spa are allowed to charge @14.42 on total package.
Nazia.
Yes, they are correct . The article only talks about FOOD bills and their service tax.
Salons will charge regular service tax
Sir, Is service tax and vat applicable on parcel food. When the food is taken as parcel from the restaurant and the parcel charge is paid.
No , service tax is not valid on parcel gfood
Dear Sir,
Good Morning
I have one doubt is service tax is applicable for Only Frost Launch Bar
I didnt get your query
Dear Sir,
I plan to start a Food Ordering Service through Mobile App.
In this Case, We will be Listing 20 to 30 Restaurants in an Area and will charge a Fee for Listing them on My Mobile App. I will definetly be paying the Service Tax for the Fee that I collect from the Restaurants.
When the User Clicks the Respective Restaurant the Menu will be Listed, The User can add the products in the Cart and Check out with their credit/debit card. Where they will be checking out of my Merchant Account which i have with CC Avenue. After Successful Checkout the Restaurant will receive the Order and they will service the client by Pickup or Delivery.
So there are 4 Entities:
The User/Buyer/Client
My Self/I will be having the Marchant Account with the Payment Gateway
The Payment Gateway Company/CC Avenue (Transaction Fee is 1.99% )
The Restaurant/Who Executes the Order
For example:
If User/Buyer/ buys for Rs.100/-
Me as a Service Provider will charge 10% as a Commission. (Out of which 1.99% for Payment Gateway)
So Payment Gateway Transfers the Money to my Bank Account within 2-3 Days after deducting 1.99+ their Service Tax.
I transfer Rs.90/- Deducting Our 10% Comission
So Out of My 10% Commission I have to pay Service Tax.
Now my question is:
As a Food Ordering Service Is it enough for me to have Service Tax Registration for this?
Do I also need to have VAT Registration for this?
Do I need to Pay VAT in this Transaction?
Or Restaurant needs to Pay VAT? or Both of us need to Pay VAT?
Should I collect VAT also on Behalf of the Restaurant and Transfer it to them?
Infact I am only Charging a Commission on the Total Amount but the Total Amount is Collected in My Bank Account which will be transferred to the Bank Account.
Please Advise your Expert Advise on this.
Thanks in Advance.
Hi isaac
A CA is more qualified to answer you query, hence I suggest better get in touch one.
We are not right people to talk on this
Manish
Had lunch at a restaurant on 21st July 2015. Foll is the bill items in order:
Item 1 = Rs 198.00
Item 2= Rs 144.00
Total Amount = Rs 342.00 (A)
VAT @ 12.% on Rs 342.00 = Rs 42.75 (B)
Service Tax @ 5.6% on Rs 342.00 = Rs 19.15 (C)
Total I payed = A + B + C = Rs 403.90.
Is the above, correct way of calculation by the restaurant ?
Looks good to me !
Its supposed to be 402.21
Thanks fr ur value added details about all taxes included in Hotel bills…:-)
Thanks for your comment Kumaresh
Thanks for the useful article sir.
I want to know if restaurant with AC is liable to pay service tax if they are not charging for the services on the bill seperately. On full bill amount they are paying Vat on composite scheme.
If applicable than we have to see the taxable services whether it exceeds 10 lacs ?
Please clarify.
Yes, they have to pay service tax to govt !
sir will you help in getting service charges , service tax, and VAT charges for the year 2015..? I wanted to get myself updated.
I didnt get your question !
IT MEANS THAT RESTAURANT CANT CHARGE VAT ON COLD DRINKS LIKE PEPSI OR COKE AS IT IS IS NOT MADE IN THE RESTAURANT
Thay are not charging Excise from you……they are charging VAT for trading of Goods/Products…..Excise is charged in case of manufacturing
Yes
VAT & Service tax both are charged on service charge.. Isn’t it wrong ?? Double taxation !!
I am not sure whats wrong in that ?
Hi Manish,
Thanks for the useful article, really appreciate it.And have a question.
Yesterday, I had pizza at pizza hut at Delhi . They charge correctly as you explained in given article i.e service charge of 10% , service tax of (40% x 14% = 5.6%) and VAT of 12.5% and 20%.
I noticed that they charge two rates of VAT i.e 12.5% on (pizza amount+service charge) and 20% on (coke amount + service charge).
As you have explained that VAT can not be taken on packaged food items and since coke is a packaged food item, how could they charged 20% on it?
Could you please tell me is it correct or wrong ?? because i frequently visit these restaurant chains and can ask them next time to amend the bill.
Thanks in advance.
Hi Saurabh
Seems like VAT on soft drinks are fine . I need to edit my article
http://www.cainindia.org/news/3_2011/hard_on_soft_drinks_raising_vat_from_125_to_20_maha_budget.html
I noticed that they charge two rates of VAT i.e 12.5% on (pizza amount+service charge) and 20% on (coke amount + service charge).
How come they charge twice on service charge(12.5% and 20%)????????????????
Thats how it is
My understanding of this is vat and service tax cannot be imposed on the same item
Suppose bill is rs 100
Service tax on 40% =40 *14% =5.6
Vat on 60% =60 *14.5%=8.7
Total bill =114.13
How can you charge vat on service component ,if 40 percent is considered service and service tax is levied on it then vat should be levied on balance 60 percent only.please correct me if I am wrong
They can be there on same item
Dear Sir,
Can u please explain me in detail… Even i also confused with that same question……………
Regards,
Vigneshkumar M
i make bakery product at home and outsource it to different canteens i want to know what taxes (in maharashtra) will be levied on my product. which ones i need to pay and which ones i need to collect from customers.
Hi swapnil
Your cases is a bit complex and I think we are not the right people to comment on it.
My suggestion would be hire someone who is professional in this area and consult them
Manish
Hi Manish,
Thanks for the useful article, really appreciate it.And have a question.
Is the service tax or VAT applicable if I buy food through online website(restaurants) and they door deliver or I order through telephone(restaurants) and they door deliver.
Thanks in advance for your response.
Definately. Service tax is to be charged and paid to govt. It does not matter if you buy online or offline .
What they cant charge is the service charge !
Do we need to pay tha ST and VAt if the VAT and ST number are not mentioned in the invoice? most of the resturent they don’t mention the same. let me know. (Example: Twist resturent in Koramangalla )
NO , in that case you dont need to
Hi,
Manish
Thank you
Thanks for your comment Shivam
Whether service charge is compulsorily to be collected or is it at the option of restaurants ?
Hi Girish GM
Its something they have to pay to govt. So they can either collect it or pay from their pocket !
Hi Manish
Thank u for ur reply. To the best of my knowledge service charge is a profit for the restaurants and shared among different people of different designation and not deposited to govt. But i want to know collection of service charge is at the option of restaurants or not ?
Opps . I by mistake read it as “Service charge” last time . Service charge is optional and its upto the restaurant if they want to take it. I think its a good idea to levy a 2-4% service charge ! , provided the service is really awesome !
Manish
But, to whom we should complaint if we found this type of situation.
As such we can’t fight against hotel management,
Its going to be tough , because for a small amount you will have to reach the consumer court . Most of the people will not do that !
for Hotel what is the rate of Service Tax in the case if we are in COT.
What do you mean ? what COT ?
What is HVAT @ 12.50 % in one of the restaurants home delivery Bill ?
They also charge Surcharge on Vat @5%
& service tax @4.94%
Hi Harmesh
The question asked by you is beyond our scope. Its suggested that you hire an expert on the issue and pay them for the advice.
Manish
Sir,
I request you to kindly provide any Government Order or Rule or ACT showing that VAT should not be collected on Service Tax in Food Bills in Andhra Pradesh State
Hi V. SREENIVASULU
The question asked by you is beyond our scope. Its suggested that you hire an expert on the issue and pay them for the advice.
Manish
Dear Sir,
Good Morning!
I request you to advise me about service tax exemption in the following scenario please. Scenario –
I’m opening a coffee cafe outlet (franchisee) in a corporate office in Noida, U.P. Area is approx. 600 sq. feet and it is situated in front of building lifts at the entrance and it is a non air conditioned area. Apart from this area all of the building which has numerous offices, is centrally air conditioned. There is also a food court on the first floor which is non air conditioned. (Let me also know your views if this food court is air conditioned as I’m not sure about it) Seating capacity of this space is approx 30 seats but it is a common area. Will I have to charge service tax from my clients ?
I would be grateful for an expert reply on this matter. Thanks in advance.
Sincere Regards,
Ankur Sethi
Hi Ankur
The question asked by you is beyond our scope. Its suggested that you hire an expert on the issue and pay them for the advice.
Manish
I presume you will agree that Taco Bell and Mc Donald’s are similar kind of restaurants. If that is true then why is it that Mc Donald’s charges Service Tax and VAT whereas Taco Bell only charges Service Tax? One of the two is wrong in the interpretation of the govt. rules, don’t you think?
This is in B’lore.
the query is this. VAT is the tax which is on the value added. SO if yr bill was 1000, intrinsic cost is 300, and value added is 700, So the VAT should be calculated on Rs 700 and not 1000. Secondly, is the service tax also applicable for home delivery
(considering the restaurant is AC, however home delivery is free) eg the commercial pizza outlets. Also can the restaurant charge a Service charge. As in eg mentioned, Rs 700 is the profit (plus service charge). So it is beyond logic that a seperate service charge be charged
Thirdly, some some markets offer buy one get one free over (eg Rs 400+400). However they charge VAT on Rs 800 rather than Rs 400. Also if we are buying a shirt with MRP 400, so can VAT be charged
Sumeet
I can comment only on service tax part, Its not applicable for the take home delivery .
Hi,
I have one query regarding billing of packaged food. For e.g. Dominos sell Coke @35+taxes. but shouldn’t it be selling at 35 (MRP)
Hi Pankaj Agarwal
If you are using it on their premises, they they can charge tax !
why service tax charge 4.09% on pizza in resturent but service tax is rate 12.36%
Because only 40% of food cost can have vat , so 40% * 12.36% = 4.09%
Is there a website where we can record our complaints like these where restaurants charging over taxes to the commission..?
Not a single consolidated place as of now !
What should I do now? Should I have a talk with the manager of that restaurant?
Do we have to pay sales tax on restaurant bills? They charged me 19.50 rs on a bill of 390rs, that too for home delivery.
Was it really Sales tax ? Or it was service tax ?
Sales tax as well as service tax both were charged.
I think Sales tax can never be charged for FOOD ITEMS . Its illegal as far as I know .
Hi,
Can VAT be charged on items like pizza even in case of take away?
I find a difference between Pizza Hut and Dominos Pizza.
Pizza Hut does not charge VAT on take-away but Dominos Pizza charges VAT on take away.
Regards,
-Praveen
As far as I know service charge should not be taken , but VAt I am not sure !
Hi Manish,
For VAT calculation on Restaurant bills, Basic bill amount plus service charges are considered.
However VAT is the Value Added Tax and is Not applicable for Basic Procurement Value on Items where VAT is Not applicable.
e.g. If Restaurant bill of Rs 700/- comprises of Tomato soup, Chicken Tanduri and Aloo tikka, many Inputs such as Tomatoes, Raw Chicken, Potatoes are exempt from VAT.
If the VAT exempt Input cost is Rs 300/-, then VAT needs to be charged on Rs 400/- . Why VAT is charged on entire Output / Menu price ?
Don’t you think that an Abetment % needs to be decided on Menu price for Charging VAT to the end Customer ?
Amit
Thanks for sharing that . Do you know a rule where restaurant has to separate the food items and then charge the VAT only on those food items where VAT is exempt. I think that wont be like that because its too tough to find that out . From what I know the VAT is applicable on the food bill .
Thanks Manish.. but what about the difference in VAT %? Has the govt declared that VAT on food will be 12.5 and 20% on drinks or can they apply any percentage on VAT? if not what action can we take against this?
Also when govt itself says that dont pay more than the MRP. Does that concept not apply for restaurants? It is only applicable for street vendors and shopkeepers?
There is another tax called VAT (value added tax) that is state specific. The rates can be as low as 5% and as high as 20% depending upon the states. Moreover, VAT for food items and drink are different. Many restaurants might club food items and drink and charge a flat rate on the total bill. In such cases, it is good to ask for separate bills for food and drinks. This should clearly show the different VAT for both the items.
Hi Manish,
I visited KFC restaurant at Vasant Vihar few days back and noticed that they have applied 12.5% VAT for food item and 20% VAT for soft drinks.When i inquired about the same, they were not aware of the details. Told that that’s what is fed in the system. I am not aware of any such rule.
Also when we visited a restaurant at Cyber Hub, Gurgaon we noticed that the MRP on Aquafina Mineral Water Bottle was just Rs. 18 but we were charged Rs. 90 plus all the taxes. Can they do that?
Hi Aditi
If you are not taking a take away and using the food/beverages inside their premises and using it there, then the shop (of whatever it is) is free to charge you any amount
Manish
In recent Judgement of HighCourt, outlets should not charge VAT on the portion on which Service Tax is being paid, i.e. they should charge VAT only on 60 % amount of pre-tax bill.
Thakns for sharing that !
Hi,
i have a doubt, it is acceptable to display rates of food items without added taxes in menu’s, even on shops while saying prices on electronic goods, shop owners say prize X if we give money then they say vat extra without figuring the final cost, is it correct
If they are not putting the final price on the menu, they must atleast write that VAT or Service Tax is extra . If they dont write it in Menu , they cant just ask for it later verbally.
I must say, you have shared few restaurant start-up insights that were not known to me. I have also written a post about the same topic on my personal blog, i hope you will not mind it accepting it within comments for further reading.
http://www.buzzparas.com/2014/11/restaurant-startup-4722
thanks
please tell me if we sell only food packet parcel so can we take vat only or service tax also inlude..?
No you cant take that in that case !
Can service charge be levied on home deliveries ????
I was charged 4.9% for home delivery.
If not, where should I lodge the complaint.
Thank you.
You can lodge complaint with the department which collects service tax
As per rules, VAT of 14.5% should be calculated and levied only on the value of food and beverages and not on ‘food+beverages+service+service charge’. Check out in this article
..http://m.timesofindia.com/city/hyderabad/Hotels-charge-VAT-even-on-service-charge-tax/articleshow/25349848.cms
Thanks for sharing that Mohit !
we have paid 12.36 % service tax on Rent , Royalties etc. and can set offf 40% of this against service tax collected from Restaurant Sales …….correct?
Yes
Can food courts also apply service tax as people generally sit on a common area and not infrastructure of the restaurant
Yes, it will still apply because infrastructure is still there, even if shared !
Excellent clarification by Manish Chauhan.
Learnt a lot. Thanks.
Derar Sir,
My Quarries How Much Service Tax in Food Parcel Service Tax , How Much Service Tax in % Particuler Service Tax Low
On food , its 4.9%
Hey, was reading this while eating and was surprised to see the bill gave no info on service charge service tax VAT etc. It had service tax number. Heading was tax invoice but had particulars and rate alone. Total Rs. 130.00 [ inclusive of all taxes] no split up was given nothing. Menu didn’t mention if the rate is inclusive or not. Are they right in giving invoice without split up??
Yes, its not the right thing . THey have to give you the full split and exact amount !
Hello
Very Useful Article…
but this article is silent on MRP based items sold in restaurants, like Soft drink & Alcohol.
And the VAT on Alcohol is high in some states…
And even after knowing all this information… how can we be sure that the Restaurant is paying this collected tax to Govt?
And is there any Notification or caselaw that says if the Menu doesnt mention about Service Charges then they cant charge it… since not every restaurant mentions about it 🙁
If you are taking it as parcel item, then you dont need to pay more than MRP ,. else you have to pay what they ask for
is service tax applicable on soft serve sell by mc’d?
Yes
Hi Manish,
I think Service Tax should be calculated only on service charge but not on foodbill+Service charge.
Total food bill=1000
service charge (10%)= 100
service tax (4.944%)= 4.9444 but not 54.384
please clarify as i am a bit confused with the below article
http://jagoinvestor.dev.diginnovators.site/forum/how-restaurant-misuse-service-tax-thought-to-share-the-email-i-got.
Thanks,
Balaram.
Logically yes, As per LAW – its not the case 🙂
The govt. Service tax law is asking mcd donals, pizza hut , etc to pay service tax on their total sale even take aways & home deliveries.. the govt is taxing u double, charging vat also n service tax also… n then ur hard earned money goes for all thses free schemes floated by govt…likes foodgrains @Rs. 2 n all..
Its govt to be blamed n not hoteliers. ..
also as per law if any part of the hotel has a AC ,then all sell may be room service, take away, garden, self service etc.. should all be taxed.
Hmm .. I dont have solution for that. One can file a PIL on this ..
Mcdonalds, pizza hut, dominoz all are charging service tax in home delivery. what action should we take bcz utimately we are paying much more than actually required to be paid.
Please reply. Thanks
You can take the receipt from them and then file a consumer court against them
i want to ask whether Mcdonalds and dominoz pizza are liable to charge service tax under resturant service? service tax is applicable for resturant service which is air contioned. service tax is not applicable to self service resturant. As per Act serving of food is important then only they are coming under resturant service.
Further they are selling food across the counter,they are not serving food.
secondly they are charging service tax on home delivery and take away parcel also. But as far i am concern no service tax on home delivery and take away parcel as there is no service. i am correct?? please reply. Thanks
I already answered that they should not be charging it
Thank you for assuring that there is no service tax on home delivery. But in this question i also asked what about when we eat in there premises.??In case of macdonalds and Dominoz they are not serving, they have opened a counter from where they are selling food across the counter. We go and collect our food and eat in their premises. Whether Macdonalds and Dominoz are liable to charge service tax when we eat in their premises. As far i am concern they should not. But i mailed the Macdonalds authority and they replied as follows:
In response to your query on the service tax, we would like to apprise you that with the new service tax introduced by the GOI on the AC restaurants’ or on restaurants that have Air Conditioning as part of the establishment. This service tax is charged at 4.8% at McDonald’s and is besides the applicable VAT. This was introduced on April 1st 2013; and would have an impact on the final invoice. This is applicable on all dine in, take away and home delivery orders.Please note McDonald’s will never deceive its customers. We do not have such cheap intents or values. We are proud of managing our business ethically not only in India, but also across the world.we would like to apprise you that such decisions are not made on the basis of a news report. There has been no clarification provided by the Government. The quick service Industry through National Restaurant Association of India has made representation to the GOI…so until there is some clear guidance and instructions from the GOI on this subject, we would continue to abide by the taxation laws.
Now when we argue with them they not even bother to think. What we should should.
Actually you need to pay service tax when you eat in their premise, they are correct .
Regarding service tax on home delivery, there are some judgements which said that it should not be charged and some say that its fine . So better ask them for a circular where its mentioned !
sir but i had a discussion with taxmann writer Mr. V.S.Datey he said that they should not charge service tax even on when we eat in their premises as they are not serving food but selling food across the counter. But Mcdonalds is not taking any chances therefore they are charging service tax.
As per Mr. datey he said they must not charge service tax on dinning as they are not serving, but sometimes macdonald said to their customer that sir please wait 10mins we will give you your table. In that case only Mcdonalds can charge service tax. But this typr of serving is very less in mcdonlads and dominozs but spmetime they serve food in table that is onces in blue moo, on that basis they might charging service tax.
Whereas there should be any service tax on Macdonalds and Dominozs as they are not serving food, they selling accross the counter. furthet they dont even give their cockery like plate also to the custome then how come they are covered under resturant service??
http://www.taxmann.com/service-tax-queries-reply/23149/mcdonalds-and-dominos-pizza-centres.aspx
Its not so straight forward. If you have issue in this, you will have to file a PIL or consumer court case , only then you will be able to see the concrete answer or judgement on this .
Thank You sir
Hello Manish sir,
Your article is definitely awesome. I want to know that if service tax is not applicable on non ac or home delivery than why pizza delivery includes service tax. I think as we customers are not aware with these calculations also all restaurants or pizza house owner or their staff are also not aware. I have a argument on this with restaurants owners many times. Some time I ask them first before giving any order but they reply service tax will be applicable. so what to do in this case. Where we can complain about it.
Correct, there should not be any service tax .
http://articles.economictimes.indiatimes.com/2013-06-20/news/40093668_1_service-tax-service-providers-recent-imposition
A truly enlightening article, Manish. Keep it up. We consumers on account of ignorance easily get duped but after becoming informed after reading up on this i intend confronting the service providers for clarifying my right and maybe learning if there is something more to it even from them. Government needs to simplify and publicise their taxes and go around surprise inspecting the restaurants and hotels as decoy customers but i wonder if it is on their agenda at all. A 24×7 government helpline to log complaints even if not provide immediate redressal is welcome.
Thanks for enlightening us on this subject. I wasn’t aware of the calculation of service tax, service charge n VAT. Whenever I have visited restaurants I just used to look at the total bill but not these charges. I always thought they will be calculating all these charges correctly. But looks like I am wrong. From next time I will be be checking all these charges. Really very nice article Manish !! Keep it up..
This is a good discussion.
Is there anywhere on the sales tax website which says that service charge cannot be levied for home delivery of food even if the restaurant is AC or serves alcohol? I need some official link which mentions this clearly.
I know a Smokin Joes outlet which not only charges service tax on home delivery, but also mentions that “service tax registration has been applied for” on the bill. So effectively, they dont have the required registration to collect service tax and they are still collecting it.
One other thing – when restaurants charge service tax and VAT on the bill, they are supposted in include respective registration numbers on the bills. Several restaurants do not print those details on the bill, and that is illegal. Most likely the restaurant is pocketing the amounts instead of paying them to the govt.
Barbecuenation is certainly an exception. Their waiters carry a badge that reads “No tips please”. Would like to share couple of experiences:
1. I usually do not pay attention to the bill amount, but when I visited Pizza Hut a few months ago, bill was much higher than what I expected. I saw a fat service charge on the bill and inquired with the waitress if that was distributed amonst the staff. She declined. I did add tip to the bill and paid, but that was the last time I visited Pizaa Hut.
2. Visted Rude Lounge with a few friends. Although I added tip amount to the bill, my credit card statement did not show it. Possibly because a service charge was already added on the bill and the restaurant did not feel it appropriate to charge amount that was inclusive of the tip. On the other hand, it could be an error on restaurant’s part. Would know when I visit the next time.
Thanks for sharing that Version ! . Its really not a good thing on part of Pizza Hut that service charge is not shared with waiters .
Dear Manish
I have one suggestion for your website.
Please add link for sharing articles on facebook, twitter etc. Or email link for sharing.
“”Sharing is Carying”
Sharing links come on the left side of the article anyways !
Very nicely explained & the comments have added various dimensions to the discussion. Really enlightning.
Thanks
Thanks, it was valuable information which most if us are not aware of.
Hi Manish,
Which is the Govt./official site reference for this calculation?
Even if I find this wrong calculation in the bill, I can only argue with restaurent.
If the matter has to be raised to some authority, its better to know the govt. reference of this.
Also, don’t we agree that we should have an EASIER process from govt. for complaining against such frauds.
Regards,
Daman
Its a FRAUD case , just call the police OR let me call the police (you dont pay money) and register a FIR first . I will have to get hold of exact website link
I have heard that a guy argued with regard to wrong calculation and then he called police and the restaurant ppl reserved the extra amount….
Thanks for sharing that !
Why should service charge / tax and VAT both be applied on the same product (food here) ?
VAT ideally applies to products & parts while service tax on labor.
e.g. when we put the car for service, the VAT is applied parts or oil etc, whereas service tax on the labor charges.
But both the charges are not applied on the same item.
Why is it not for the food. Either it be qualified as product or as a service and just 1 charge should be levied on it.
What are your thoughts Manish ?
Service tax is there because there is SERVICE invovled . and VAT because there is value addition involved .
Truly enlightening article Mr. Manish. I wanted to know if the same rule applies when we stay in a hotel as well or how different it is. Please let me know.
Yes. its true for hotel also , but in that case the service tax will be full on 12.36%
I guess you missed the additional tax of 10% on aerated drinks/liqours which is applied by central govt. I am not actually sure whether its 10% or 20%. That is currently missing in your information above. Apart from that brilliant. Thanks…
But is it applicable on all states ?
Hi Manish – is it applicable to purchasing an apartment as well. I have the below math, does it make any sense?? Thanks in advance. ~ Blake
SALES TAX AND SERVICE TAX CALCULATION
UDI X FIR = ___________________________X Vacant Land Guidance Value
237 2.5 592.5 1800 (land Guidance value )
Land cost = Rs 1066500
Total sale consideration = Rs 5200000
Total Sale Consideration – Land Cost = construction Cost x 70%
5200000 1066500 4133500 70%
Depreciation Cost 2893450 14.50%
419550.25 Sales Tax
Construction Cost – Depreciation Cost = Value for service Tax x 12.36%
4133500
2893450
1240050 12.36% 153270.18 Service tax
SALES TAX 419550.25
SERVICE TAX 153270.18
Total value of Taxes 572820.43
DD On The Sub Register Gandhinagar
5.6% on 52 Lakhs 291200
1% on 52 Lakhs 52000
Registration Value 343200
Hi Manish/ Anyone – can throw some light on the above please.
Thanks,
Mat
Hi Mathew
Please open a thread to discuss it here – http://www.jagoinvestor.com/forum/
Thanks Manish. This is something we never told about or we never take a pain to understand 🙂
Yea .. please spread the new acquired knowledge !
Well explained and a real eye opener for the common man
Thanks
Hi… thanks for usefull information.
Recently i took admission in 1 institute at bangalore .. they charged for the course around 5000. service tax is 450. including. How they can deduct the tax only 450 rupees. ??
Unfortunately trainer has not available ..so they returned back the money after 1 day, the amount is 4500, i asked them to give receipt as they told no !!! i told to bifurcate the amount they have given, they said, 450 service tax– 50 rupees for bank charges , as i paid through debit card.
How much institutes can take the service tax ?? please let me know …
regards /-
praveen
I also have faced such situations but at retail outlets.Over a period of time I learnt from my daughter in US to always ask for what is there REFUND policy.Let them clearly spell it out on paper,read it and if suits you make a purchase.
In such a situation they can never make surprising deductions etc.
reg
VIKRAM
thanks for the info
Welcome
What about the hotel bills?
What if the restaurant or hotel is adamant about charging higher taxes?
Should we threaten them of reporting to Consumer forum?
Definately. Tell them this is rule and how are they charging more. Take the bill and actually file a police complaint. Tell them that you are calling the police there itself !
Manish
Hi Manish,
I wanted to know about the restaurants like McDonalds or KFC. They charge Service tax on the total bill which includes VAT (Value Added Tax). so this 4.995% should be charged on the total food bill excluding VAT? McDonald prices already include VAT. Please provide your feedback
No they cant do that. ask them for explaination !
pizza hut had a different strategy to dupe customer:
pizza price = price+4.944 ST =179
service charge on this amount= 17.9
These guys are charging service charge on service tax 🙂 smart way………..
In that case tell them you will call policy on account of “Fraud” . They just cant do this . !
nice info as always Manish….!!
Thanks
Thanks Sandip !
Thanks, Manish. Very useful information. I think if you confront an established restaurant they will honour your argument but if its a small place you will be lucky to even make a point. And everybody will be staring at you as if you are from Mars and your own friends or family will be discouraging from making it an issue.
True . Thats your choice on what you want to do in a situation 🙂
Thanks,Manish for such a great information.
Dear Manish
I wonder,weather what ever Service Tax/VAT collected by Restaurant is deposited in respective Govt Department by them?
May be it is printed on bill and collected from customers.
Please shed some light in to this if possible.
Reg
Vikram
their service tax number should be mentioned in the BILL , if your revenues goes up by 10 lacs, then service tax registration is compulsory anyways .
Dear Manish
Whether there any system which can confirmed our paid service tax , VAT etc reached to state govermnet / central govermnet.
I am wondering why UID (Uniq identification number ) not coming for every transation we do.
Then govermnet revenue will increase & frauds by restaturant will reduce.
No idea on that
hi Manish,
what to do , when they charge me more?
Mahesh KV
You can refuse to pay more , they should call the police if they want, tell them
Has economic times copied your article ?
http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/paying-an-inflated-bill-at-restaurants-tips-to-reduce-extra-charges/articleshow/21548605.cms?curpg=2
No Anand
Its a common topic many websites have written about. Also seems like that article has come before our article . There are tons of other articles on same topic which were written after facebook circulation of some wrong information.
Manish
hi Manish,
I have a question on the cost of packaged goods such as cool drinks in eateries/restaurants. Are restaurants allowed to charge exorbitantly on packaged goods? I had earlier taken a video in a bakery here : http://www.youtube.com/watch?v=BzXuHwpmm6Q&lc=yyQxe1ds8RTIRpe1c_9Fass2ENCK8OGGdAbqpMYtQjw
Isn’t there any limit on the cost of packaged goods if I buy in a restaurant?
If you are enjoying all the benefits of hotel by sitting there , enjoying you meal , then they can charge you that. But if you have just gone there to buy some packaged item and leave , then they cant charge more than MRP
Hi,
I have a question regarding the cost of packaged goods such as cool drinks. I had earlier gone to a bakery and the bakery charges the customers a rate much higher than MRP. You can check out my video here: http://www.youtube.com/watch?v=BzXuHwpmm6Q&lc=yyQxe1ds8RTIRpe1c_9Fass2ENCK8OGGdAbqpMYtQjw
I wanted to know if the restaurants/bakeries are allowed to charge high amount on packaged goods.
Nice article Manish …..good to know important stuffs
Welcome
Dear Manish,
You mentioned about feelings after seeing your bill infalted by 20-30% but my experience at the rogue Pizza hut (kora kendra borivali ) takes the cake about what they charged me , Service tax , VAT, SERVICE CHARGE (I guess it was there dont remember now) & a special tax known as CT . I enquired with them that what is this CT Tax ,the staff told me that CT was carbon tax charged on aerated drinks. What irritated me most was that I had taken a pre designed standard meal with soup . Instead of soup they offered cola and then they had the audacity to force carbon tax on me.
A lot people dont even check properly what charges they are paying & they make a fool of themselves without realising .Unless & untill we raise our voice againt this injustice….we will be foolishly paying heavily…JAAGO GRAHAK JAAGO
Regards
joel
Thanks for sharing your case with us Joel !
Nice article Manish though I doubt how many people have the patience to work out the amounts and then argue with the hotel staff if it’s incorrect! The attitude of the staff will be as if we’re trying to get a discount (you know what I’m talking about)
Let some IT guy/co devlop a APP for this and which can be uploaded in mobile.
True 🙂 .. ANything “right” is always tough !
Thanks manish for sharing this. Good information. Most of us ignorant to check tax session while paying the bill.
Welcome
Thank you Manish.
The article was indeed very helpful and I hope to make it useful too, though I doubt there will be a few restaurants out there who really practice hospitality without any pretence.
And thanks to other co-writers too, who through small additions made a large add-on to my knowledge.
Thankyou all.
THanks Sumeet for leaving your comment 🙂
TIPS stands for To insure prompt service though why it is paid at the end of the meal I can’t comprehend , may be for the next visit.
Service tax net includes almost all services that comprise a huge chunk of the household consumption basket, your mobile bill etc
Service tax was imposed for first time on 3 services with effect from 1-7-1994 and its scope is increasing every year. As on 1st May, 2011, 119 services are taxable services in India. From 1st April 2012 only 17 items, such as essential education, public transport and services meant for agriculture, are exempt from this tax.
The Service Tax collections have shown a steady rise since its inception in 1994. The tax collections have grown manifolds since 1994-95 i.e from Rs. 410 crores in 1994-95 to Rs.71174.58 crores in 2010-11.The target for the year 2010-11 was Rs.69400 Crores and the actual realisation was Rs.71174.58 Crores, showing increase of Rs.1774.58 Crores (2.56%). There is a substantial growth in the assessee base from 3943 numbers in 1994-95. The revenue and assessee statistics from the year 1994-95 onwards onwards is given in our article Basics of Service Tax
Thanks for sharing so much in detail !
Appreciate your article.
Some hotels are even more worse, they charge Service Tax on whole bill and in addition to that they square it off to forthcoming fifty.
Once, I have had bill of 465 at “Up and Above, Chandni Chowk, Pune” which I paid by Credit Card, and I signed bill without adding any extra tip, but on my monthly statement it showed-up as 500, when I contacted them they did not entertain me at all, and then onwards I did not entertain them as well.
But when you gave your credit card, what did the bill say ? 465 or 500 ? Because if its 465 , how can they deduct more ? I think you should check consumer court !
It was 465. I had “Customer Receipt” of credit card.
May I know how to file complaint in consumer court?
Try akosha.com
Try Akosha.com
I guess, they added 35 rs on “Merchant’s Copy” of CC bill after I signed it.
Whenever I sign my credit card merchant copy, I make a point to write the amount again myself, circle it, and sign below. That way, it keeps me satisfied that I indeed checked the amount… also, in case of a dispute or fraud, it may work as a proof that if it has no number and not circled, most probably it is fake and not signed by me !
For consumer court cases, try http://www.akosha.com, they are good !
Good one !
One way to avoid it for future is While signing the merchant copy specifically enter 0(zero) as TIP and show the total amount . It is difficult to change the amount then!
Wow. what a superb information. I have never noticed such things on the bill earlier but now i will do.
Welcome
Service tax calculation needs some correction in the content.
Service tax @12% on 40% of bill amount.
Education Cess 3% on service tax i.e. tax amount is @ 12.36%.
Overall service tax on the bill amount = 0.4 x 12.36 % = 4.944 % on total bill.
Hope it is clear.
Have I not done the same ?
Please check this “4.944% (12.5% X 40%)”, needs removal of one digits and addition of two more digits.
4.944% (12.36% X 40%)
Ahh yea .. didnt realise that ! .. will fix it
Informative post, as always.
It is true that manyincl. me) accept something as bible and dono hink twice about it. As inicated by you there are mny finer points for which consumer may be paying because of personl ignorance or ignorance/carelessness of the service provider.
Thank you.
Thanks for this useful info! What about service tax in lodges? Should it be 12.36% or 5%?
It should be 12.36%
Thanks Manish for your prompt reply. The water bottle was in packaged state (sealed). The bill showed that the price for the “mineral water” is Rs. 120/-. Please tell me, how I can take a step against them.
Very useful…no need to pay a tip from now on, in case there is service charge in the bill.
Yes, no need for it 🙂
For a bottle of mineral water in a restaurant, I had to pay Rs. 120/- + Service Tax + VAT. The same water bottle is available outside at MRP of Rs. 15/-. Has the restaurant (or any other business entity) the legal right to charge more than MRP for the bottle of water (or as such any article). If not, then can you please tell me about how I can stop them from doing this?
If its in packaged state (unsealed) , then they should not be able to charge for it more than MRP , but if its opened and given to you in glass, then its now a “service” , and can be charged for whatever price they want ! – see this http://www.hindustantimes.com/India-news/NewDelhi/By-law-restaurants-can-charge-you-more-than-MRP/Article1-858413.aspx
Manish
Thanks Manish for your prompt reply. The water bottle was in packaged state (sealed). The bill showed that the price for the “mineral water” is Rs. 120/-. Please tell me, how I can take a step against them.
But did you just went there to buy the water bottle ? I mean if you were sitting and dining and take all the benefits of ambiance and their service, then they are free to charge for it as per their wish – as per COURT !
If you buy food from them and also buy a sealed bottled water, aren’t the supposed to tax you on the food and just add the MRP of the water-bottle?
Yes .. it should happen like that only !
Very informative article, Thanks for enlightening Us..
I have doubt regarding VAT, how it should be calculated?I have found that it is calculated on the total amount, not excluding packaged drinking water/cold drinks.
Kindly clarify.
Is this a valid statement from a restaurant: “Since we are keeping packaged drinking water/drinks cold, that’s why we are charging VAT on them.”
I have one more query;
In what circumstances, any restaurant can charge double the MRP rate of package drinking water??
I have experienced many times, the restaurants charging about Rs.40-50 for 1l packaged drinking water(MRP-Rs.15-20).Is this legal?
Please Help n Guide
Seems like YES , if you are sitting in restaurant and enjoying the ambiance – http://www.hindustantimes.com/India-news/NewDelhi/By-law-restaurants-can-charge-you-more-than-MRP/Article1-858413.aspx
All other products VAT will be applicable on profit when it is resold.Why in food items we needs to pay it on entire amount (product+service charges) as input(purchase) VAT on vegetables/noveg is zero.
I am not an expert on this actually. Please ask it on our forum – http://www.jagoinvestor.com/forum/
dear manish ji
thanks for very useful information but practly it is not possible when you are with your guests relatives and you cant argue, we all know that owner of all hotels restaurant had haired GUNDAS OR YOU CAN SAY BOUNCERS , police of that area is already settled with monthly . I further add that no simple man can run the hotel with out gundas and police settlement
we can only do that to complaint about it later to various authority
have you any other suggestion
dear MANISH G
I have noticed a few things in some of the Hyderabad restaurants –
1. They round off the service tax part to 5% (I guess that is tolerable).
2. Some of the restaurants do include the soft drinks (Coke, Pepsi) and on that they charge the VAT. This is definitely not acceptable.
Thanks for the enlightenment, Manis !!
Yes agree
1st is fine
2nd is not
Good explanation of the latest rules.
However, what if the same restaurant has both a/c and non a/c sections/halls (clearly separated and has separate doors for both) and I eat in the non a/c section of it?
Do I have to pay service tax?
Yes, you still have to . I can understand that you are not eating in AC section, but the law only says that Restaurant should have AC , they dont say customer should consume AC while eating. But that does not mean hotels can put AC in the kitchen and say – “see – we have the AC” 🙂
I hope you got my point
Manish
Hi Manish, I came across the following. Your Thoughts?
he CBEC has provided clarifications vide Circular No. 173/8/2013-ST., Dated: October 7, 2013 on various doubts and questions raised pertaining to Restaurant Services, which is reproduced here in below:
Doubt 1. In a complex where air conditioned as well as non-air conditioned restaurants are operational but food is sourced from the common kitchen, will service tax arise in the non-air conditioned restaurant?
Clarification – Services provided in relation to serving of food or beverages by a restaurant, eating joint or mess, having the facility of air conditioning or central air heating in any part of the establishment, at any time during the year (hereinafter referred as ‘specified restaurant’) attracts service tax. In a complex, if there is more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the specified restaurant is liable to service tax and service provided in a non air-conditioned or non centrally air- heated restaurant will not be liable to service tax. In such cases, service provided in the non air-conditioned / non-centrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules.
This is a bit advanced .. I am not aware upto this level .
Dear Manish,
In one of the restauramts at NOIDA I paid the following taxes on 02nd july2012
The total bill for food items alone is Rs.550
(a) Service Charge-10% – 55
(b)Service Tax-8.652% – 52.34
(c)VAT-12.5% – 75.63
(d) Additional Tax-1% – 6.05
(e)PFA-NGO-(Flat Rs.10) – 10/
The total bill amount with taxes 749 which is 36% Higher than what I eat.
I dont understand what is meant by Additional Tax and PFA_NGO for a flat Rs.10 .As per your calculation logic it should be Rs29.90 for service tax but they levied me Rs.52.34/
Thanks for giving a good insight on the subject
Regards
Which hotel was it . Seems like its wrong .
Service tax has to be 4.944% only and cant cross that. because its central govt that . Cant deviate from state to state basis .
You need to ask them what is that 1% extra tax. It might be some local tax in delhi . Also that Rs 10 is something they give in charity on your behalf. Was it written in Menu that it will happen by default ? Did they ask for that ? If not, its just not fair, you should ask them to explain it ! . and threaten them about consumer court case !
Manish
1% is the additional tax charged in Noida. It is for Metro development and quite legal.
I dont remember whether Rs 10 they give in charity on my behalf was written in Menu card. since this transaction happened almost a year before. Since I was not aware about the service tax component i have no idea on that day so i paid whatever they charged but 36% higher than what i eat was not comfortable to me on that day.Thanks for your initiative in bringing the matter with a clear cut calculations so that here after i can raise my concern with the restaurants.
Welcome
Do we need to pay VAT for the parcel…………..???????
Yes, you still need to pay VAT , but service tax is to be paid or not is still very fuzzy , i was not able to find out the answer for that
I ate at Pizza Hut and they added the service tax. But once when I carried the food myself, they didn’t add service tax. Hence I suppose, service tax should not be levied if you don’t eat in their premise or don’t want it delivered to your place.
Definately ! .. You are not suppose to pay service tax on Parcels and Take home items !
what the Service Charge in this case ?
do we still need to pay the Service Charge even if its a take away ?
I think service charge should not be charged incase of take away. Clarify with the restaurant on this
Thanks for the valuable info
Welcome Junaid
Hi,
Thanks Manish very useful information. Please provide following information also-
1. What to do if some restaurants are not clear about this rule or try to avoid it where to complain this?
2. Link you provided about official gadget is sufficient to show restaurant about service tax rule.
Thanks and Regards
Kranti
Kranti
If they do not agree and are not clear about it, tell them they should not be in business if they dont have bandwidth to be professional . Ignorance cant be excuse in these cases. Its about MONEY 🙂 . tell them you wont pay and they should call POLICE
Manish
And the police will come and compel you to pay what the restaurant demands. There are different kind of “Services Charges” 😛
haha !
Thanks Manish for this value addition.
Why do we even have to provide tip to the waiter? Don’t they get a salary from the restaurant owner?
Mohammad
The TIP which you pay from your pocket is 100% in your hands , you can give it or avoid it . Regarding service charges , its clearly mentioned in the Menu, if you are not comfortable with it, better avoid the restaurant, but they are free to charge it if they want, now its upto you to decide what you need to do !
What if hotel owner doesn’t pay the vat excatly for the business done. What will be there punishment.
You will have to explain about it to the VAT inspector at some point in time !
Mohammad, in the food and hospitality sector, in most cases, the salary is always mentioned as a fixed sum + tips. Its not just the waiters, even office staff gets a cut of the service tax that they collect.
In the U.S. some states even set their minimum wages differently for tipped and non-tipped employees, see this: http://www.dol.gov/whd/state/tipped.htm
Lets just say, its part of a custom. A way of showing your respect for giving you good service. And its a motivation for the waiter / doorman to serve you better.
In some countries, (like parts of Australia), its not polite to leave a tip. In others, its impolite not to.