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Know the charges, taxes on your restaurant bill to avoid being overcharged

Posted on September 30 2020


Know the charges, taxes on your restaurant bill to avoid being overcharged
Now days, eating out can be too expensive, considering all the extra charges and taxes that are required to be paid, in addition to the cost of what you have order. According to the announcement recent by the Department of Consumer Affairs, the service charges that the restaurants include in their bill as an additional charges are not necessary to be paid. Only if we are satisfied with the services provided by us then we can pay or else we can choose not to pay the extra charges.
Many restaurants have reacted after hearing about the announcement by affirming that the service charges are mandatory. The National Restaurants Association of India has also stated a statement which implies that customers are free to not eat at a precise restaurant if they don’t want to pay the service charge.

There are the break-up of the restaurant bills to help you to understand what we should pay for and what should be avoided.
Service charge 

It is not a tax, and hence the restaurants are not legally obligated to enforce it. The amount of service charge a restaurant fee is entirely at its own vigilance. Typically, 10% is charged which is also mentioned on the menu.

Service tax 

The service tax rate is 14%, but since the restaurants administer both goods and services, the Central Government administers a discount of 60% on the service tax to be collected by a restaurant comes down to 40% of the actual rate, which is 5.6%. If you see a service tax of 6% or 6.1% on your bill, it is because the restaurant has clubbed both the service tax along with Swachh Bharat Cess and Krishi Kalyan Cess.

Swachh Bharat Cess and Krishi Kalyan Cess 

Recently, the Swachh Bharat Cess and Krishi Kalyan Cess have been introduced and are applicable to taxable services. Their rate is 0.5%, but in the case of restaurants, like service tax, they apply to only 40% of the bill amount. Therefore, their efficient rate turns out to be 0.2% of your restaurant bill.

Value Added Tax
VAT rates vary across states and can also vary depending on the thing that has been ordered. It is important to remember that the VAT rate for food and non-alcoholic beverages differs as compared for liquor.

Also the restaurant can choose to levy the service tax on the service charge. Service charge forms a part of the service component, so a restaurant can levy the service tax on it. But VAT can be charged only on the food and beverages. Always keep in mind that VAT on service charge should not be added to your bill by the restaurant.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.


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