The tax department has asked for scanning of accounts in restaurants for checking if service charges are being passed on to employees and if not its taxability as income.
The income tax dept. as part of its regular assessment exercise is asked to note whether there is under-reporting or total non-disclosure in case of income received as service charges. A close examination of the financial statement for the service charges collected as well as its disbursal to its employees is being examined.
The crackdown has been launched after concerns have been raised by the ministry of consumer affairs. And this arbitrary amount decided by some of the eateries is not being distributed among the restaurant's staff.
The move by the dept is being hailed as any misuse can be avoided as what is required as per the Income tax law and Act is that the service charges be included in the total turnover of the restaurant and be disbursed across the entire restaurant staff.
Earlier, also some of the restaurants were spotted not passing input tax credit benefit as part of GST to consumers.