Service Tax Case Study

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SERVICE TAX IN RESTAURANTS Going out to eat on a weekend, you order main course, soup, desert and whatever you wish to eat after going through the menu. When the bill comes, you are shocked! A difference of 15-20% in the prices you saw before placing the order and the digits on the bill. These are the add ons because of service tax and service charge which inflate the amount on the bill. Having waited the entire week for a nice weekend at a fine dining place, you do not want to question so you pay the bill. However, the majority does not know the details of these extra charges which inflate the bill amount. It is a simple thing which is complicated by the people who do not understand the meaning of the terms associated with the concept of…show more content…
It is state specific tax which can vary from 5-20% depending upon the states. There is difference in VAT on food and on drinks. Separate bill for food and drinks should be asked for by the customer to avoid being charged a flat rate on the total bill. EXAMPLE Having dined in an AC restaurant where the price of food items summed to Rs 900, service charges (goes to the restaurant) and VAT and service tax (goes to Government) Items Amount Bill of food item 1000 Service charge (assuming 6%) 60 Sum Total 1060 Service tax to be levied on (40% of sub-total) 424 Service tax (at the rate of 12.36%) 52.4064 VAT @ 12.5% of the sub-total 132.5 Total amount to be paid 1244.9064 Many times, restaurants charge their customers the highest rate on the total bill. This can be questioned by the customers. CONCLUSION Ignorance of the restaurant managers and unwillingness of the customers are the reasons for the customers being taken for granted most of the times. With proper knowledge of the components of a restaurant bill the customer can be wise and get his/her bill corrected to reduce the amount. SERVICE TAX: PRIOR TO NEGATIVE…show more content…
With effect from 01/05/2011 restaurant service was made a taxable service. Since sale element is also involved in a restaurant service, an abatement of 70 per cent was provided for the purposes of valuation vide Notification No. 34/2011-ST. It was the gross amount charged by the service provider on which 30 percent service tax was

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