Service Charges In Your Hotel Bills Is Nowhere Related To ‘Service Tax

[JANASENA]

Don’t Get Cheated: Service Charges in Your Hotel Bills is Nowhere Related to ‘Service Tax’, Clarifies Finance Ministry

 

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If you’ve had a meal at a restaurant recently, double check your receipt to make sure that you’ve not been swindled! Many restaurants and hotels have been charging customers excessively by billing them a ‘service charge’, in addition to a service tax. They then try to convince the customer that it is part of the tax that goes to the government.

The Union Finance Ministry has clarified on Tuesday that ‘service charge’ has absolutely nothing to do with service tax, and it does not go into the government coffers. Instead, it ends up in the restaurant owner’s pocket.

In air-conditioned restaurants and hotels, service tax is set at 14%, but only on 40 percent of the total bill amount. The effective service tax rate, therefore works out to a mere 5.6 percent of the total amount charged. Many restaurants are also swindling their customers by charging a 14% tax on the entire bill amount.