Service Tax only in AC restaurants; effective rate 5.6%
Restaurants without air conditioning facility will not charge any service tax from their customers while the ones with ACs will charge only on the 40% of the total bill amount, the finance ministry said on Tuesday.
Restaurants, eating-joints or messes, which do not have the facility of air-conditioning or central-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,” the ministry said in a clarification on applicability of the levy.
In case of air-conditioned or air-heated restaurants, “60% 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%,” it added.
With the increase in the rate of Service Tax to 14% (subsuming the Education Cesses) from June 1, the effective rate of tax will be 5.6% of the total amount charged.
Prior to June 1, when the rate of Service Tax was 12.36% (including Education Cesses), the effective rate was 4.94%.
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 at any time during the year in relation to serving of food or beverages.
After the increase in the rate of the tax, some of the key services that have become costlier are: railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators.
Source: Hindustan Times http://www.hindustantimes.com/business-news/service-tax-only-in-ac-restaurants-effective-rate-5-6/article1-1356697.aspx