Hotel industry tax structure

swapnil (CA Final) (598 Points)

25 May 2014  

There is a Hotel In mumbai. The tax structure of the hotel are as follow

Billing are as follow

   This is a Room Revenue   
     
   Food Items        22,000.00
   Beverages        18,000.00
          40,000.00
 Add :   Service Charge @ 5% Levied by Hotel Policy (Whole amt of Service Charge distributed to employees          2,000.00
   
   
   Net / Basic Amt        42,000.00
 Add :   VAT @ 12.5%          5,250.00
 Add :   Service Tax @ 7.416 %          3,116.40
   Final Bill        50,366.40

My question is that here VAT and Service tax is levied on 5% Service Charge Amt, is it correct or wrong ???????