Understanding Service Tax Misuse in Restaurants
This is my first thread under the Financial Management category. I am not a finance professional but thought of sharing this as received.
Ramanathan Hariharan updated his status: "Surprisingly after reading about the 'Service Tax', I strongly decided to share this information with everyone. This happened at the restaurant. Let me explain.
We had been to several restaurants recently. I observed that the 'service tax' has been misused and charged to customers like you and me.
Example of Incorrect Service Tax Calculation
- 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 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.
Taking Action Against Incorrect Charges
So I have started asking them questions and was 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.
Empowering Change Through Awareness
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 bill and receipt that you make payment on.
I hope this is useful to all.
Thanks & Regards,
Sudhir
From India, Vadodara
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1310This is my first thread under the Financial Management category. I am not a finance professional but thought of sharing this as received.
Ramanathan Hariharan updated his status: "Surprisingly after reading about the 'Service Tax', I strongly decided to share this information with everyone. This happened at the restaurant. Let me explain.
We had been to several restaurants recently. I observed that the 'service tax' has been misused and charged to customers like you and me.
Example of Incorrect Service Tax Calculation
- 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 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.
Taking Action Against Incorrect Charges
So I have started asking them questions and was 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.
Empowering Change Through Awareness
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 bill and receipt that you make payment on.
I hope this is useful to all.
Thanks & Regards,
Sudhir
From India, Vadodara
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Service Tax.pdf