The government on Tuesday notified that some restaurants, hotels, eateries besides charging for the food and beverages are also charging ‘service charges' in their bills.
And these ‘service charges' are retained by the restaurants/hotels/eateries.
Some of the consumers have a misapprehension that these ‘service charges' are being collected by the restaurant on behalf of the Government as tax, the Finance Ministry said in the statement.
It is clarified that these ‘service charges' collected by the restaurants, hotels are retained by the restaurants and are not ‘service tax' imposed by the Government.
It is further clarified that effective service tax rate is applicable to restaurants having the facility of air-conditioning or central air-heating in any part of the establishment is 5.6% (14% of 40%) of the total amount charged.
Means that restaurants, eating-joints or messes which do not have the facility of air-conditioning or central air-heating are exempt from service tax.