Yesterday I went to watch a movie late night at Amanora town center in Pune. I and my wife had our dinner at a small Italian restaurant and the food there was quite good.
When it was time to pay the bill, I went to the counter and paid the bill. When I got the bill in my hand, I realized that there is a problem. They had charged me “service tax”. However the main issue was that there was no service tax number mentioned on the bill.
Charging Service Tax without Service tax number is Illegal
Yes, you heard it right.
The Bill copy did not have any service tax number mentioned on it, but the restaurant had put a service tax charge on the bill. This is Illegal and can’t be done. Hence I told the staff that I can’t pay that service tax unless they give me the service tax number.
The staff as usual was ignorant about this and told me that I should talk to “owner” and tried to give me his number. However I told them, it’s not what I will deal with and I will not leave unless they give me service tax number because they are illegally charging service tax.
Finally after 5 minutes, the staff told me that Owner is not reachable and they will give me service tax number later. But I refused to budge and demanded them to pay me service tax amount back and not repeat this, as its illegal.
Finally they had to refund me back and I took the money. Here is what another CA has to say about this on Quora
I realized that not more than 1 out of 1000 people know this rule, and this needs to be spread among people. Many restaurants are misusing the fact that now people know that service tax is a unavoidable tax and has to be paid, however many do not know the rules and conditions under which any business can charge it. Even Service charge is now an optional thing and you decline to pay it.
Note that many restaurants will tell you that they have applied for the service tax number and are awaiting it, but this is mostly a trick to fool you and to save themselves out of the situation and embarrassment. However even in that case it’s not right, and you should demand to see the proof for that.
Service tax number is mandatory to charge Service Tax
As per service tax rules, service tax can be charged only if you applied and got your service tax number. This service tax number has to be written on the invoice copy. Without that you cannot charge service tax from your customers.
In case of restaurants, the service tax has to be charged only on 40% of the FOOD bill and beverages. So if you eat for Rs 1,000 (food + beverages), then only 6% on the total bill is to be charged, which will be Rs 1060.
Here is a sample of a correct bill which mentions the service tax number on the bill itself.
How to verify is the service tax number is valid and not fake?
Few people ask me, how to verify that the service tax number mentioned on the bill is not fake? Because the hotel guy can just randomly put some number, which looks like the service tax number.
The simple solution is to check the name of the person/company under whose name the service tax number is registered. It just take 1 min to verify that.
- Step 1 : Go to this link
- Step 2 : Enter the 15 digit Service tax code (also called Assessee code)
- Step 3 : Enter the captcha
Once you do this, the page will show you the
Non Bailable Offence under sec 89 of service tax
If service tax is charged without service tax number, then how will it be paid to government? Because you need the service tax number to pay the tax to govt. Sec 89 of finance Act tells that incase an offence is done like this, then the person can be jailed for up to 1 yrs (and up to 2-3 yrs incase amount involved is above Rs 50 lacs).
Below is a snapshot taken from Taxguru website which writes about tax related topics.
Do you need to pay service tax if you dont sit in AC?
This is very interesting.
One of the biggest questions people raise is that if a restaurant has AC in one part, but not in other part and if you are seating in a non-AC section and dined, still do you have to pay the service tax?
Or imagine is AC was not working at that time, even then will you be charged the service tax?
The answer to that is YES.
Sorry, but the service tax rules clearly states that. The service tax rules simply says that if the estabilishment (the hotel or restaurant) has the facility of air conditioning or central air heating in any part of the establishment, then they have to charge the service tax in their bill.
It does not matter if you got the benefit of the AC at the time of eating. All that matters is that they have AC anywhere in the premises.
This itself is enough for a restaurant to charge the service tax. However if an establishment is divided into two parts with the two different names and entities, then the non-ac part cant charge the service tax (where the service was given) , even if the food was prepared in the AC part. Here is the exact wordings from the service tax notification on this issue
3 things to remember when you visit a restaurant next time
When you visit the restaurant next time, make sure you keep in mind following 3 points.
- Check if service tax number is mentioned on the bill or not, if they are charging service tax on the bill
- Make sure the service tax is charged @6% on the food + non-alcoholic bill and 15% on the alcoholic charges
- Make sure there is AC in the restaurant if you are charged service tax.
Spread this Information
There are thousands of restaurants which might be charging service tax illegally without have service tax number and millions of customers on daily basis are paying that as they are not aware of the exact rule. This is practiced by many restaurants, small hotels, and many other businesses.
So spread and share this article as much as you can so that more and more people can know about this. Also share your experience about this.