Service tax on hotel bills... worth pondering

Manikanta Raju CA,CWA,(CS) (Industry) (4482 Points)

15 November 2012  


Be careful while paying restaurant bills.
About Service Tax..... how the restaurants take your money ... We had been to several restaurants recently. I observed that "service tax" has been mis-used and charged to the customers.
Let me give an example. 
Descripttion Tax % Amount 
Food and Beverage       1,000 
Service Charges @ 10% (on Food and beverage amount) 10%           100
Sub Total     1,100 
Service Tax @ 4.94% on sub total (4.94% on F & B + Service Charges) 4.94%             54
VAT @ 14.5% on Rs. 1,000 14.50%        145 
Total Bill Amount   1,299 
As per the definition - "Service Tax can be charged only for the services provided to the customer". 
Now, see what is happening here in the above said example. 
Service Tax should be charged only on the Service Charges amount i.e Rs.100 and not on the entire amount (1000+100). 
In this example, the customer should be charged only Rs. 4.94, whereas he has been charged Rs. 49.00 extra. 
Either they say: Sir we cannot change the format of the bill - so , we will recalculate and tell you the revised amount. You may pay only that.  Sir, you do not need to pay the Service Tax amount itself. 
I now have 3 to 4 restaurant bills, for which I have paid only the service tax - on the service charges and not on the total amount. 
Every bill must carry the TIN number and Service Tax Number, if they charge it. So, I ask for the Service tax number if it is not available in the receipt that they provide. 
We cannot go to any government official and ask them to get this right - because of our system. 
Please remember - we cannot change any political leader - but we can change ourselves.   If we change ourselves - things will change. 
Please do share this with every one of your friends and known people. 
Ask for the right tax calculation and pay only the tax which is supposed to be paid. Verify every bills and receipts that you make payment on.