Restaurant Bill

This query is : Resolved 

07 April 2010

Dear All

My Query is related to General Restaurant Food Bill.
In case Service charges have been separately charged in the bill, can Service Tax be levied on the abovementioned service charges??

And is VAT applicable on whole amount (including service charges which have been separately mentioned as such)??

The third doubt is - In what all cases can Service Tax be levied in a Restaurant Food Bill??

I will Be really thankful to all.

CA Shivang (Expert)
07 April 2010


i think u talking of NCR if m not wrong. I had the same case with Pizza hut in NCR. they are charging service charge in other words its mandatory tip.... They have some certificate from the ITO to charge service tax inclusive of tht amount. You can ask from them as practically its not possible.

Puneet Gupta (Querist)
07 April 2010

Thank u Shivang Sir for ur quick revert.

Yes the case is of NCR only.
I will be really thankful to you if you could elaborate the explanation.

CA Shivang (Expert)
07 April 2010

well puneet for the VAT question: Its not possible to charge VAT on service charge. Only servie tax will be levied on that.
Vat will be levied on the amount of the food bill and not on the service charge.
And service tax will be levied on service charge. If you have any bill with you than pls give an example of it.

Puneet Gupta (Querist)
07 April 2010

Dear Sir
I have two food bills.
In one of the bills VAT has been levied on Food Amount as well as Service charges & the bill is of Punjabi By Nature.

In another Local Restaurant Bill, VAt has been levied on only Food bill amount.

I am not able to decide which is correct??

Sir Another doubt is When is VAT applicable to a restaurant. As in 90% of local restaurant bills, VAT is not levied.

Thank you Sir

CA Shivang (Expert)
07 April 2010

Every trader has to charge vat as per applicability. YOu can surf Internet for that. Even restaurants have to charge Vat irrespective of the amount and they can take credit also for the VAT input.
Some pay adhoc to the govn based on the total receipts while some charge and credit VAT account and open VAT account and deposit monthly. Depends upon the trader/owner.

CA. O.P. Agarwalla (Expert)
19 April 2010

If the question is as simple as that whether VAT is leviable on service charges, answer may be rightly given in negative.

Now coming to the question of Restaurant. Here the question does not remain so simple. Please go through the definition of 'Sale price' in your State Act. In Assam the sale price by its definition includes charges for anything done by the dealer in respect of goods at the time of or before delivery of the goods. Thus without going in to the nature and purpose of service charges, it is not proper to held that this sum will be out of the ambit of VAT.

Further the ameded clause 29A of the Article 366 of the Constitution of India
includes the same in taxes on sale pr purchases by using the following para-

(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration;

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