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Service tax on Restaurant services – Calculation Details

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Service tax on Restaurant services – Calculation Details. How is Service tax for Restaurant services calculated?, This article has been specifically written for those who were trying to know about the calculation of the service tax on the restaurant services which are provided by the restaurants and how they charge the same. This article will save many of the food lovers to give more amount than the prescribed amount. Most of the time the consumers are unaware about the fraud being done by the hotel owners in the name of service tax. So to save them from paying more, this article will help you to get the amount of service tax being charged. Now you can scroll down below n check more details for “Service tax on Restaurant services”

Service tax on Restaurant services

Service tax on Restaurant services CAknowledge

Service charges:

Most of the people are confused regarding the service charges and they consider it to be charged by the government and so they pay it whatever they ask. These charges are levied by the owners for the services they provide to the customers. The owners can charge whatever amount they can charge, but the only condition is that they need to mention the same in the menu. If not mentioned in the menu list than they cannot charge any penny in the name of service charge as they have not communicated the same to the customer. Normally restaurants charges service charge as 5% to 10% of the total bill. This service charge is normally for the staff members, so it may be referred as tip only and so you should not worry if you do not provide tip to the waiter as indirectly you have paid the same.

Service Tax:

As we do not only avail food from the restaurant, there is also service portion involved, where the waiter serves the food, air conditioner, electricity etc. which should be charged but the service tax should not be charged on the full amount and therefore government has also given abatement for the goods portion. The abatement rate in case of restaurant services is 60%. Current Service tax rate is 14.5%, which makes service tax effectively to 5.8% after abatement.

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Conditions for levy of service tax:

The only condition for levy of service tax is the presence of air conditioner or centralized heating system in the restaurant. The interpretation of the words has to be very relevant. Here the words are air conditioner and not centralized air conditioner, so if there is one A.C. in the whole restaurant then also the hotel would be liable to charge service tax.

Exemptions from service tax There are mainly two major exemptions available to the assessee. They are:

  1. From 22-10-2013, services provided by the way of canteen in the factory as covered in Factories Act, 1948 and also having the facility of A.C. in the restaurant are not liable to charge the service tax. Please notice here that the canteen should be in the premises of the factory. The word factory would include as many things as mentioned in the Act.
  2. For reliving the small service providers from the service tax, there has been the basic exemption from the paying the service tax. If the total service value exceeds the basic exemption limit of Rs 10 lacs than the provider needs to charge the tax from the customers and pay tax.
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About Yash Shah

Yash Shah is passionate article writer and has written more than 100 articles in the field of Finance, Insurance, Stock Market, Company Law, Auditing, Taxation and many others. In case of any queries or suggestions, you can reach the author @ [email protected], you can also catch him on facebook @ yashshah299

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