What is difference between service tax and Service Charges?
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Service tax
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Tax is levied as per the provisions of respective Act which is statutory in nature where as service charges are levied by your creditor for providing particular service.
Service tax is the tax levied by the government for services rendered by the restaurant.
Service Charge
This is charged by the restaurant for the services rendered to you. Since the money goes to the restaurant, the establishments are free to charge what they like, as there are no guidelines provided by the tax authority. The charges can vary from 5% to 20% — it depends upon the restaurant.
On July 14, the government clarified that service charges collected by the restaurant and then retained by the restaurant are not imposed by the government. The only taxes imposed by the government are service tax and VAT (which differs state-wise).
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