How many times hasn’t your inflated restaurant bill left you clueless as to how components like VAT, ST, SC etc are being calculated? Not everyone is aware about these taxation details. So here is detailed explanation of How restaurant bills are calculated typically.
Service charge Service charge is collected by the restaurant for rendering its service to you. It is not levied by the government but purely charged by the restaurants. They are free to charge any amount as there are no guidelines. Service typically varies between 5-10% of the bill amount.
Service Tax Service tax is a tax levied by the government. This is 14 percent and payable on 40 percent of your total bill, which includes food, drinks, service charge and served in an air-conditioned restaurant only. In simple words, service tax would be 5.6 percent (i.e. 14 percent of 40 percent) of your total bill. Make sure that the restaurant does not charge you more than 5.6% (of the total bill) as service tax and that it is an AC restaurant.
Value Added Tax VAT is Value added Tax collected by State Govt. VAT is only applicable to the food items which are prepared inside the restaurant, because they “added some value” and then hand it over to you. So make sure you do not pay it on packaged items which are not prepared by Restaurant like Packaged food items, water bottles etc.
For example: Food Bill – Rs 1,000 Service Charge – Rs 100 Service tax (5.6% of 1,100) – Rs 61.6 VAT (14.5% of 1,100) – Rs 159.5 Total – Rs 1,321
So next time when you visit a restaurant. Do calculate and pay the bill.
