Love is in the air. And if this 'V' day, you are taking your special someone out for a dinner date, you better do two things. First, while eating your meal, give your partner your 100 percent attention. But, once the dinner bill arrives, give the dinner bill your full attention. There are various charges and taxes you pay over and above your food and drinks.
And you might just cheated on your bill, if you pay no attention to it. A typical restaurant bill has the items which you have ordered and their prices. Then there is service charges, service tax and value added tax as well.
“Service charge is not the same as service tax. Service charge is the amount you pay for the service of the establishment and it goes into their pocket,” said Anil Rego, chartered accountant and CEO, Right Horizons, an investment advisory and wealth management firm.
Loosely put, it’s like paying a tip. This charge varies from restaurant to restaurant and can be in the range of 5-10 percent of the food and drinks charge.
Can you refuse to pay this charge?
“If it’s mentioned on the menu, that you will be charged a service charge, you will have to pay. Or, else you can choose not to pay the service charge. But, after a meal people are generally in a good mood, so they land up paying the charge anyway,” says Sudhir Kaushik, chartered accountant and co-founder, Taxspanner.com.
If the restaurant levies a service charge, you can simply not choose to tip the waiting staff.
Value added tax, or VAT, is the next charge on your bill. This tax should be charged on food items prepared at the restaurants. “VAT varies from state to state and item to item,” Kaushik said.
The next is service tax, and unlike service charge, this tax goes to the government. This tax does not vary from state to state like the VAT. For a meal in an air-conditioned restaurant with licence to serve liquor, you will have to pay a service tax of 4.94 percent.
The service tax is calculated as 12.36 percent of 40 percent of total cost of food and drink and the service charge levied by the hotel. VAT is not included while calculating service tax.
The following example will illustrate the tax calculation.
Total for food items is: Rs 865
Service charge (5%): Rs 43
Sub total: Rs 908
Service tax is 12.36% of 40% of Rs 908.
40 percent of Rs 908 is Rs 363.20
12.36% of Rs 363.20 is Rs 44.89.
So the service tax to be charged is Rs 44.89.
Grand total (after rounding off) = (Sub total + Service tax) = (908 + 44.89) = Rs. 953
The most important thing to remember is that service tax is not charged on VAT. The restaurant might cheat you by charging you a service charge, even when it's not mentioned in the menu. Or, they might cheat you by charging a service tax which includes VAT as well. Or they might collect a service tax but calling it service charge and cheat you as well as the government.
We are not making this up, see the advertisement by customs and central excise department. Yes, do check if you've actually ordered all the items which you have been charge for, this too happens at times.
Of course, you might say, who has the time to look into the bill on a 'V' day evening. But, don't let love throw out common sense, do check the bill. Now that you know what all goes into your restaurant bill, this V day, when you go for your dinner date, do check out if you are being charged more than required.
And yes, Happy V-Day!