Service charge, charged by a restaurant

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CA Ankit Verma (Querist)
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08 December 2010 A restaurant charges service charge @ 10% on food served and then charges VAT @ 12.5% on the aggregate amount [i.e. Charges for food items + Service charge @ 10% on such food items]

NOTE:-
This service charge @ 10% is charged only if food is consumed at restaurant, i.e. if free home-delivery is opted then no service charge is charged.

[Q1] Is it correct to charge VAT on service charge as well ? Should'nt it be seperately charged by service tax rather than by VAT ?

[Q2] If No, then should he charge composite rate of tax ?

S. Karthi

S. Karthi (Expert)
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08 December 2010 If they serve at restaurant, service charges should be applicable. pl. ensure the service charges is applicable only on servicing the goods by restaurant staff (labour charges), not for goods and labour charge should show in separate column. then only, they eligible to deduct service charge.

CA Ankit Verma

CA Ankit Verma (Querist)
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08 December 2010 Yes they do show service charge separately in bill but still charge VAT on whole aggregate amount rather than charging Service Tax on service charge and VAT on Food items separately.

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