Service tax

This query is : Resolved

Akash Anand (Querist)
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08 January 2014 A air conditional indian restaurent providing the following services 0

Gross services(food& beverages)provied-
- RS. 1000
Services charge(10%) Rs. 100
VAT is 14%

how much will be service tax ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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08 January 2014 For Example, Value of Goods Rs. 1,000/-
Value of services (or service charges) Rs. 100/-
Total bill Rs. 1,100/-
ST @ 4.944 Rs. 54.34 (on Rs. 1,100/- and not just 100/-)
GVAT (as per rules) Say Rs. 50
Total 1204.34/-

Please note ( Value of taxable services
- restaurant services = 40% of 12.36% = 4.944%)

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Akash Anand

Akash Anand (Querist)
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09 January 2014
vat will 1100*14%=154
Services tax- 1100*4.944%= 54.384

is it cooect?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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09 January 2014 yes it is correct Akash....

CA. Vikash Parakh

CA. Vikash Parakh (Expert)
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09 January 2014 All big restaurants including Pizza Hut are charging in this manner only, but this is wrong. Only service tax @ 12.36% should be charged on Service charges amount of Rs.100/- in your example, as no sale is involved.

Also, regarding the food part of Rs.1000/-, when service tax is charged @ 4.944% after considering abatement of 60%, some abatement mechanism should also be devised by VAT authorities to exclude the service portion of 40% and VAT should be charged only on 60% of Rs.1000/-
This wrongly charging of taxes doesn't affect the restaurant owners as they are receiving the same from customers and paying to Govt., but the customers are required to bear the burden of this wrong taxation system of restaurants.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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09 January 2014 Dear Parakh Bhai,

these days there are enough points where gross confusion prevails with regards to service tax, vat etc. With regards to the position that service tax should only be charged on service charges, it has not been accepted by the department as of now. Also to argue that service charges cover for the all the services provided is not correct as the service charge practically cover nothing but the TIP amount!

with regards to VAT, yes it is a valid point but as long as no abatement is announced, the above discussed method of computation is correct and safe.

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