Insight right fact for commons, Service Charges Are Not Government Taxes - Alternative Media Forum


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Monday, 20 July 2015

Insight right fact for commons, Service Charges Are Not Government Taxes

When you go to a fine dining restaurant, the first thing you think about is the tax you need to pay. Have you ever wondered why you pay this extra amount even after having an already highly paid meal? Many of us had the misconception that these service taxes are government taxes but in real it’s not, reports Business insider India.

Some restaurants or hotels add a service charge with the billing amount which is retained by the hotels or restaurants, these service charges are not a part of government tax. This has been revealed in a press release by a ministry of finance.

The press release also clarified that ,effective service tax rate in respect of services provided in relation to serving of food or beverage by a restaurant, eating joint or mess having the facility of air-conditioning or central air-heating in any part of the establishment is 5.6 percent (14 percent of 40 percent) of the total amount charged.

In the budget speech Finance minister Arun jaitely conveyed that In order to facilitate a smooth transition to levy of tax on service by both central and state governments  "it is proposed to increase the present rate" of service tax plus education cess from 12.36 per cent to a consolidated rate of 14 per cent”. Thus by 1st June 2015 a tax charge of 14 percent is being applied on food and beverages all over the country. This made eating out in restaurants, insurance and phone bills expensive, among many other things.

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