What can I learn in one minute that will be useful for the rest of my life?
Thank you for reading this post, don't forget to subscribe!Thank you for reading this post, don't forget to subscribe!Always look back at the bill that you pay in restaurants.
Yes. And by looking back I mean check the taxes that are levied on the bill that you just had.
It is an incident I recently went through. My hungry friends and I, went to pizza hut to grab on some lip-smacking pizzas. We went to this outlet and ordered pizzas. We had a good meal in the hot outlet and then we went to the cashier for our bill. The bill was of 1010 and he charged around 200Rs. of some tax.
Like all normal people, we believe in the food chains and restaurants that whatever they charge is always genuine. Though I decided to check it once. They had put 58Rs. as service tax. As per my knowledge, I knew that restaurants cannot levy service tax when it is not an AC restaurant. I went back and questioned the cashier on this. He became sweaty(I don’t know because of lack of AC or my question made him sweaty!!) He gave us some insane reasons like not putting service charge but service tax is valid and it goes to the govt. Being not so clear about my concepts either, I left.
Back home, I researched everything and found out I was right. So, sharing a piece of knowledge with all of you that please whenever you see your bills, take out one minute to calculate these taxes:
Service Tax: It is the tax levied by the government on the services rendered by restaurants. Service tax is same in all states. The service tax rate has been hiked from 12.36% to 14.5% The restaurant must be air-conditioned for the service tax. The problem here is that most of the customers are taxed at the full bill and not on the 40% of the bill as directed. To make things simple, service tax should be levied on 40% of the total bill. Hence whenever you see service tax on the total bill exceeding about 5.8%, you can question it.
EDIT: It is now 5.8% following the levy of 0.5% Swachh Bharat cess on all taxable services from November 15.
Service Charge: These are the charges that are levied by the restaurant for the services rendered to the customer. This portion of the bill goes to the restaurant. The establishments are free to charge any amount as service charges as there are no guidelines provided by the tax authority. The charge varies from 5% to 10%. This amount is equivalent to the tips that people usually give to waiters. The charges are supposed to be shared among the staff. In this services like serving food, deliveries and etc is included but not on take away!!
VAT: The rates can be as low as 5% and as high as 20% depending upon the states. Moreover, VAT for food items and drink are different. Many restaurants might club food items and drink and charge a flat rate on the total bill. In such cases, it is good to ask for separate bills for food and drinks. This should clearly show the different VAT for both the items.
How restaurants dupe customers in the name of service tax and service charges
This is a big deceiving factor for Indians, that we never look upon our bills for the taxes levied. Make sure to take out just one minute after having that warm water bowl and check if the taxes are right for whatever you experience. Hope it helps.
Thanks for the edit.
EDIT:
1)Many people have questioned in the comments that they are unable to get the calculative part of service tax. So, I will post my explanation in the answer itself. Hope it serves the purpose.
Example: The actual thing that should be calculated is service tax that should be applied on the 40% of the bill. i.e
Suppose, I went to a restaurant and my bill came up to be Rs. 1000. Now, the service tax will be calculated on 40% of 1000 i.e. on Rs.400. Service tax is:14.5%
So, service tax on 400 equals= Rs.58
So now the bill will amount to 1058.
But, people in restaurants used to charge tax on full bill and not on 40% of the bill that makes more amount as compared to just Rs.58.
So, they decided through a formula that calculate tax at 5.8% on the total bill. It will also come out to be same. See,
5.8% of 1000 : Rs.58
So, it is written always check your bill if the service tax written is not more than 5.8% of the total bill.
Moreover if bills include any food sold at or below MRP(like Pepsi and coke) then service tax shouldn’t be charged on MRP included in final bill
2) Many are asking what shall we do regarding this if we are charged wrongly.
I don’t really have an idea about it, but if you question the restaurant back, there are chances that he will look back to it. Cases have happened like this but if you ask about whom to complain then I want to ask anyone who is a CA or knows about this policy please let us know whom can we complain to.
Heya nyc research dne and u r vry mch correct…. I am pursuing CA so i knw about it …. it is called abatement a type of relief given by govt ….so u r taxed at 40% of the bill amount that comes to 5.8% (40% of 14.5) but adding to your knowledge now its not 14.5% its 15% now …. Modi baba has added 0.5% as krishi kalyan cess which brings the calculation now to 6% (40%of 15)
Hope this will help you edit
Nice work, incase when service tax is written more than 6℅ then you can hand over the copy of bill to service tax deptt. they will ensure it with owner that this will not happen in future with customers.
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