Don’t Get Cheated: Everything You Need To Know About Service Charge & Service Tax

The Logical Indian

July 15th, 2015

Image Source: Time

If you’ve had a meal at a restaurant recently, double check your receipt to make sure that you’ve not been swindled! Many restaurants and hotels have been charging customers excessively by billing them a ‘service charge’, in addition to a service tax. They then try to convince the customer that it is part of the tax that goes to the government.

The Union Finance Ministry has clarified on July 14 that ‘service charge’ has absolutely nothing to do with service tax, and it does not go into the government coffers. Instead, it ends up in the restaurant owner’s pocket.

In air-conditioned restaurants and hotels, service tax is set at 14%, but only on 40 percent of the total bill amount. The effective service tax rate, therefore works out to a mere 5.6 percent of the total amount charged. Many restaurants are also swindling their customers by charging a 14% tax on the entire bill amount.

Next time, you notice a restaurant swindling you, be a logical Indian, stand up for your rights and demand a refund. Also, don’t forget to take a photo of the overpriced bill, and post it to us!

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We appeal to The Logical Indian community that whenever you see restaurants charging service tax more than 5.6%, ask for an explanation.

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