SERVICE TAX At Restaurants - VERY IMPORTANT !!!

[psnarasimhan]

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Interesting.
If we cant change system, at least we should change our self
I find restaurant bills often so confusing,
...
I just give up and pay the amount shown n the bottom line.
Perhaps we shouldn't.
Incidentally, I also resent the inclusion of Service Charges in
restaurant bills, because it assumes that I was satisfied with the
service. Just a matter of principle.
Service Charge should be
something I leave behind at my personal discretion.
I recently demanded that the service charge be removed as the service was non-existent. After a short - very short! - discussion, it was removed. About Service Tax..... Be aware
This happened at the restaurant.
Let me explain.
We had been to several restaurants recently. I observed that "service
tax" was being misused in the way it was being charged to customers.
Let me give an example.
- - - - - - - - - - - - - - - - - - -
Food and Beverage = Rs. 1000.00
Service Charges @ 10% = Rs. 100.00
Service Tax @ 4.94% = Rs. 54.34 (on F&B + Service Charges)
VAT @14.5% = Rs. 145.00
Total = Rs. 1299.34

As per the definition - "Service Tax can be charged ONLY for the
services provided to the customer".
Now, see what is happening here in the above example.
Service Tax should be charged only on the Service Charge amount i.e
Rs.100 ONLY, and NOT on the entire amount (1000+100).
In this example, the customer should be charged only Rs 4.94, whereas
he has been charged Rs. 49.00 extra.
Where does this money go?
Only the restaurant owner and the chartered accountants who work for them know.
· So, I have started asking them the questions - and am
surprised to see the reaction from famous restaurants. Either they
say: "Sir we cannot change the format of the bill - so , we will
recalculate and tell you the revised amount. You may pay only that."
OR
· "Sir, you do not need to pay the Service Tax amount itself"!!
I now have 3 to 4 restaurant bills, but for which I have paid only the
service tax on the service charge and NOT on the total amount.
Every bill MUST carry the TIN number and Service Tax Number, if they
charge it. So . . . , I ask for the Service tax number if it is not
available in the receipt that they provide.
As we cannot go to any government official and ask them to get this
right - because of our system.
Please remember - we cannot change any political leader - but we can
change ourselves.
If we change ourselves - things will change.
Please do share this with every one of your friends and known people.
Ask for the right tax calculation

and
Pay only the tax which is supposed to be paid.
Verify every bill and receipt that you make payment on.

"Please share if you think its worth"

:hungry:

 

[krish44]

most hotels charge service tax on total amoun. iI did not know it is only on service rendered.thanks for the info.narasimhan ji.only today I was reading in HT how shop keepers give faulty receipts to each other for fictitious transactions to get lower rate of service tax.whenever a law is made ,someone finds a way out to cheat.LOL

 

[V.Balasubramani]

PSN Ji,

You are right.

These Restaurants follow different systems and try to loot the customers. It is necessary that the consumer needs to be more alert!!

In this regard, I would like to share extract of news item appeared in 'The Times of India' which throws more light on the subject.

Hotels charge VAT even on service charge & tax

HYDERABAD: Finally, officials have woken up to the hotels and restaurants in the city fleecing customers in the name of Value Added Tax (VAT). The vigilance and enforcement department randomly inspected six hotels and restaurants in the city a few days ago and found to their surprise that these establishments had collected Rs 2.48 crore as excess VAT from unsuspecting customers during the previous financial year.

As per rules, VAT of 14.5% should be calculated and levied only on the value of food and beverages. However, it was found that these hotels and restaurants were levying VAT on food and beverages, service tax and service charge. While most of the hotels were passing on the excess collections to the commercial taxes department, some of them were pocketing the same, V & E sources said.

"Hotels and restaurants cannot collect VAT on service tax and service charge components. It is an unnecessary burden on the consumers. People should be vigilant and check their bills while paying the amount," Vigilance and Enforcement (V&E) director general RP Thakur told TOI. According to officials, this practice is prevalent in many hotels and restaurants in the city.

While VAT goes to the state government, service tax of 4.95% goes to the Centre. Service charge is a recent practice adopted by the eateries and depending on the category, they are charging anywhere between 5% and 20% on the food and beverages consumed. "We found that VAT was being levied on the final amount that includes food and beverages, sales tax and service charge. In fact, many customers presume all these to be taxes and leave behind a hefty tip beyond the bill. Next time around, check the bill carefully before making the payment," officials said.

The recent random inspections by the vigilance authorities revealed that Taj Krishna in Banjara Hills levied a VAT of Rs 29.32 lakh on the total service charge of Rs 2.02 crore that it collected from customers in 2012-13. Similarly, it levied a VAT of Rs 42.32 lakh on the total sales tax of Rs 2.91 crore that it collected from the customers during the same year. This totally works out to an excess VAT collection of Rs 71.64 lakh from the customers during the year 2-12-13.

After conducting the inspection, the V&E department has informed the commercial taxes department about the excess collection of VAT by hotels and restaurants. When contacted, Commercial Taxes commissioner Hiralal Samariya said he was not aware of the excess collection of tax amount by some hotels.

Read more: http://timesofindia.indiatimes.com/city/hyderabad/Hotels-charge-VAT-even-on-service-charge-tax/articleshow/25349848.cms

Source: Times of India, dt:Nov.7, 2013

 

[tbs]

hi
everything has service tax/VAT....BUT NO GOOD SERVICE AT ALL....CUSTOMER CARE IS LAST PRIORITY....they collect service

tax from customers....i dont know how much really govt gets from these taxes....ALL TAX RULES HAVE LOOP HOLES...

 

[krish44]

VBji
this is also news to me . I do not know how much we have been taken for a ride. we should eat only at amma unavagam under the circumstances. LOL

 

[vgane]

VBji
this is also news to me . I do not know how much we have been taken for a ride. we should eat only at amma unavagam under the circumstances. LOL

There is a large variety there with Chappathi/Dhal getting added to the menu and varieties of rice..I saw a huge crowd there the other day..Cheap & hygienic food

 

[V.Balasubramani]

VBji
this is also news to me . I do not know how much we have been taken for a ride. we should eat only at amma unavagam under the circumstances. LOL

Krish Ji,


That way Tami Nadu public are enjoying this privilege. We envisage more such well fare measures.

 

[srisimha]

Dear Narasimhan sir,
I think the bar coucil on 3rd november 2012 issued a notice that servic tax should be charged only on service charge and not on the food bill, but however the additional commissioner of service tax has clarified that the interpretation of bar coubncil is incorrect as the service tax rules clearly states that service tax shall is also to be charged on 40% of the Food bill. hence in your example 12.36% of 40% of 1,100 i.e 54.34 should be charged and not on Rs.100 alone, I think the restaurant is correct please get it clarified.

As they have estimated that out of total food bill 40% is for the service provided and 60% is for the food item sold.



Reg
Srisimha