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Rahul and friends went to a restaurant near Indra Nagra, Bangalore. The Idea was to spend the little cash that was left with them on good food and to rejuvenate for next day, Monday!! Little cash, since its the last week of the month.smiley

So, they ordered the full course meal, literally everything available on the menu. After mental calculation they were convinced that the bill was still under budget. But when the bill arrived all were shocked, it was way above their expectation.broken heartbroken heart

They paid the bill through credit card and left the restaurant, Rahul unwillingly paid 100 bucks to the waiter.angry

This happens with all of us, but either we hate maths and don't want to get into complications of rechecking the price or we just find it embarrassing to ask Restaurant Manager, how the price inflated or what are the components of total price and we end up paying high price.

Let's just understand few terms that we see on food bills but do not understand or let's say don't want to understand. 

A restaurant bill, generally, comprises of four components:-

1) Basic food cost

2) Service Charge

3) Service Tax

4) VAT

1) Basic Food Cost: This part of bill finds its place in menu and everyone (unless the person gives a damn about price)  makes a mental calculation of total bill on this price, This is the very foundation of the bill above which eateries charge Taxes and other levies.

2) Service Charge: This charge is NOT levied by the act and hence, it can vary from restaurant to restaurant. It can be as low as 5% and can go well up to 15%. This part of the bill goes to the restaurant for the services they have provided to you like well mannered and well behaving waiters. If a restaurant is levying service charge don't pay tip, because this portion covers tip of the waiter. If you are paying tip even then, it will be like Ek par Ek Muft offer for the restaurant owner.crying

3) Service Tax: People generally mistake service charge as Service Tax. However, the two are entirely different. Service Tax is levied by Central government and hence  it remains fixed. This fixed portion is 12.36% of 40% of total bill (including basic price and service charge). or lets say it in 4.94% of the total bill.

For this tax to be applicable the Restaurant MUST be Air conditioned.

The problem is most of the times the customer pays taxes on full amount and not on 40% of the total bill. So, hence now on whenever you see service tax exceeding 5 % (4.94%) of your total bill, always raise a question.

Jaago grahak Jaago.enlightenedenlightened

4) VAT: To add ghee to the fire, we have another Tax called VAT. Now this part is quite confusing. Because VAT is state administered and can vary from state to state. The rate could be as low as 5% and as high as 20%. Further, the rate VAT differs from product to product. The owner for their convenience charges VAT at the highest rate flat on everything, putting extra burden on your pocket.

Question the charges levied to you. It's your right. We all have this habit of not questioning the right person and to cursing the government for everything.

Happy dining :)smiley

Visit my blog: MudraMantri Blogspot

Article has been animated and suitably changed to present the basic idea published in Economic times.


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Category Service Tax   Report

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