Beware of getting cheated at restaurants: The hidden facts of service charge and service tax

Have you recently had an experience where you had nice and satisfying full course dinner at a very good restaurant. You had checked all the prices prior to ordering but when the bill came, you were little surprised for the bill was inflated and you had to pay more than you expected. If you have faced this kind of situation in any "fine dining" restaurant, then the restaurant is not as fine as it shows to be.

Numerous cases like this have come up lately where restaurants and hotels charge 'service charges' in addition to the service taxes falsely. On being questioned they give a detailed explanation about it being completely legal and money going to the government treasure. However, the reality is that the extra money goes to the pockets of the clever cheats.

The root of the problem lies in our ignorance towards taxes and charges. The restaurants take advantage of this disinterest and ignorance to extract extra money from us.

Many of us often confuse service tax with service charges. Service tax is the tax levied by the Government on all the services provided by restaurants like food, beverages, and A.C. Service tax is same in all states i.e. 14.5% on the 40% of the bill or it should be charged 5.8%(i.e. 40% of 14.5) on full bill. It has been reported that the restaurants charge 14.5% service tax at the full bill and not on the 40% of the bill as per the law.

The Service charge on the other hand is charged by the restaurant for the services rendered and is equivalent to the tips people usually leave for the waiters. The restaurants and hotels charge as per their will as there are no guidelines provided by the taxation authority.

Most of us ignore the fact that we have been charged a little more just to avoid argument or we do not think about it all together. However, as per the rule if the menu mentions service charges, you have to pay. If it doesn't, you have all the rights to question.

Also you must know that it is mandatory for every bill to carry the TIN and Service Tax Number, if applicable.

So the next time you go to dine out remember that if charged extra, you can always question and explain this to the restaurant manager to get your bill corrected and ensure a real "Fine Dine".

If you found the information useful, kindly pass it on to your family and friends.

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