Consumers will not be charged any service tax for eating in non-air conditioned restaurants while those who eat in an AC restaurant will have to pay the service tax on only 40 per cent of the total amount, the government clarified.
Air conditioned hotels and restaurants attract a service tax on 40 per cent of the billed amount. At old service tax rate of 12.36 per cent, the effective rate of taxation came to 4.94 per cent of the food bill. Now after the service tax rates were increased to 14 per cent, it would come to 5.6 per cent.
At present, service tax is chargeable on services provided by restaurants, eating joints or messes which have the facility of air conditioning or central air heating in any part of the establishment in relation to serving of food or beverages.
No AC, no tax
Restaurants, eating joints or messes which do not have the facility of air conditioning or central air heating in any part of the establishment are exempt from service tax.
“In other words, only air conditioned or air heated restaurants are required to pay service tax,” an official statement said.
“In respect of such air conditioned or air heated restaurants which are required to pay service tax, 60 per cent of the value is to be deducted from the total amount charged while applying the rate of service tax and tax is to be calculated on the balance 40 per cent,” it said.
Finance Minister Arun Jaitley in his Budget had proposed to raise service tax from 12.36 per cent (including education cess) to 14 per cent. The proposal took effect from June 1. The tax is levied on all services, except a small negative list.
Some of the key services that attract the levy include railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators.
Courtesy – Deccan Herald