How Restaurant misuse Service Tax – Thought to share the email i got

POSTED BY Biswa Singh ON October 31, 2012 2:57 pm COMMENTS (10)

About Service Tax in India….. how the restaurants loot your money … Be aware

Surprisingly after reading about

the Service Tax, I strongly decided to share this information to 

This happened at the restaurant. Let me explain.

We had been to several restaurants recently. I observed that “service tax” has been mis-used and charged to the customers like you and me.

Let me give an example.

Food and Beverage = Rs. 1000.00
Service Charges @ 10% = Rs. 100.00 (10% on the Food and beverage amount)
Service Tax @ 4.94% = Rs. 54.34 (4.94% on F&B + Service Charges)
VAT @14.5% = Rs. 145.00
Total = Rs. 1299.34

As per the definition – “Service Tax can be charged only for the services provided to the customer”.

Now, see what is happening here in the above said example.

Service Tax should be charged only on the Service Charges amount i.e Rs.100 and not on the entire amount (1000+100).

In this example, the customer should be charged only Rs 4.94, whereas he has been charged 
Rs. 49.00 extra.

Where does this money go? Only the restaurant owner and the chartered accountants who work for them know. 

· So, I have started asking them the questions – and surprised to see the reactions from the famous restaurants. Either they say: Sir we cannot change the format of the bill – so , we will recalculate and tell you the revised amount. You may pay only that.

· Sir, you do not need to pay the Service Tax amount itself.

I now have 3 to 4 restaurant bills, for which I have paid only the service tax – on the service charges and not on the total amount.

Every bill must carry the TIN number and Service Tax Number, if they charge it. So, I ask for the Service tax number if it is not available in the receipt that they provide.

We cannot go to any government official and ask them to get this right – because of our system.

Please remember – we cannot change any political leader – but we can change ourselves. If we change ourselves – things will change.

Please do share this with every one of your friends and known people.

Ask for the right tax calculation and pay only the tax which is supposed to be paid. Verify every bills and receipts that you make payment on


10 replies on this article “How Restaurant misuse Service Tax – Thought to share the email i got”

  1. Suman says:


    I was charged for take food from an Resturant in Sahakarnagar Banglore. The Resturant has charged 5% to the invoice. They call it as PCH

    1. We are not sure what it is. But I guess it might be service charge. Clarify with them only

  2. Dear Karan, thanks for clearing the doubt.



  3. Hi

    The Bar Council had wrongly interpretted the Service Tax Law and had issued a notice that Service Tax should only be levied on the Service Charges and not on the Food Bill.

    However, this interpretation is totally wrong. Whatever was being shared through mails and facebook sharing was all misleading, as the law clearly states that Service Tax is applicable on the Food bill as well

    Moreover, the Addl Commissioner of Service Tax has also clarified that as per Law – Service Tax is liable to be paid on 40% of the Food Bill.

    For more info, I’ve done a detailed post on this topic –

  4. says:

    Hi Biswa,

    Thanks for the valuable Info.


  5. Lakshmipathy G says:

    Thanks for the information

  6. Prasoon says:

    Great information really.

    What can we do as a customer, if still restaurant denies to change the bill amount? What should we say/do if they argue with – ‘Sir ye to computerized bill hai, calculation to correct hai’/ ‘Each restaurant charges like that only’/ or any other silly excuse?

    Also, how the VAT(14.5%) should be charged? On F&B only, On F&B+SC, Or on F&B+SC+ST?

  7. Thanks for that info !

  8. bharat shah says:

    thank you.

    1. sunil says:

      The above article is totally misleading and wrong. Kindly read the notification no. 24 of service tax department which clearly says that the service tax is to be levied on 40% of gross amount in the bill (only applicable in restaurants where there is liquor and air-conditioned). So if the bill amount is 100 then service tax @12.36% will be levied on Rs.40/- (i.e.,Rs.4.94/-). According to the definition of SALES in VAT and service tax ” the amount for which goods are sold include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof”.

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