- What is Service Tax?
Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994.
- Who pays this tax?
According to Service Tax Rules 1994, individuals or businesses who provide a taxable service must pay service tax to a central government.
However everyone who provides a taxable service does not automatically become liable to pay service tax. You are liable to pay service tax only if your turnover in a financial year crosses Rs 10 lakh.
- What are the taxable services?
As on 1st May, 2011, 119 services are taxable services in India and are specified in Section 65(105) of the Finance Act,1994. Refer http://www.cbec.gov.in/htdocs-servicetax/st-proc-home.
- What is the rate of Service Tax?
At present, the effective rate of Service Tax is 15% on 40% of the value of the total taxable service. The above effective rate comprises of Service Tax @14% payable on the “gross value of taxable service”, Swachh Bharat Cess of 0.5%, and Krishi Kalyan Cess of 0.5%.
- Is service tax waived off?
Yes, Government will waive service tax on debit and credit card transactions of up to Rs 2,000 in a single transaction.
- Service tax on non-ac restaurants?
Service tax will not be levied on customers dining in restaurants without air conditioning facility or central heating.
- What is Service Charge?
An extra charge made for serving customers in a restaurant.
Service charge is optional. Consumer has a discretion to pay or not. A consumer dissatisfied with the services can have it waived off.
- What is VAT in a Restaurant Bill?
Value Added Tax (VAT) is levied on items that are sold in an improved form, where value is added to an item before it is sold to a customer.
VAT is a state tax having said its subjected to change with the state. But normally ranges between 12 to 15%. Usually, VAT is charged at 14.5% on non-alcoholic beverages and food items and VAT on alcoholic drinks and cocktails is charged at 5.5%.
- Is the amount of Service Tax charged from the client compulsorily to be indicated separately in the Bills / Invoices / Challans raised on him?
Yes. It is mandatory to separately indicate the amount of Service Tax charged in the Bills/Invoices/Challans raised on the clients.
- Is the serving of food and/or beverages by way of room service liable to service tax?
When the food is served in the room, service tax cannot be charged under the restaurant service as the service is not provided in the premises of theair-conditioned restaurant with a licence to serve liquor. Also, the same cannot be charged under the Short Term Accommodation head if the bill forthe food will be raised separately and it does not form part of the declared tariff.
In the case of food served on room, service tax is chargeable @ 60% of the value.
- Will the services provided by taxable restaurant in other parts of the hotel e.g. swimming pool, or an open area attached to a restaurant be also liable to Service Tax?
The taxable services provided by a restaurant in other parts of the hotel e.g. swimming pool, or an open area attached to the restaurant are also liable to Service Tax as these areas become extensions of the restaurant.