Next time you visit an air-conditioned restaurant, don’t pay the bill without checking the service tax charge. If the figure is higher than 4.94 per cent, bring it to the notice of the manager.

With reports of some restaurants charging higher service tax even before the Finance Bill has been passed, the tax authorities have clarified any change will only come into effect when a date is notified after the passage of the Finance Bill.

This year’s Budget has proposed a hike in service tax rate to 14 per cent. Since, restaurants are supposed to charge the tax on 40 per cent of the bill amount, some of them have already started collecting tax at the rate of 5.6 per cent.

According to a circular issued by the Service Tax Department, certain doubts had been raised with regard to abatement on value of services provided in relation to serving food or beverages by a restaurant, eating joint or a mess, having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year.

The valuation of services provided in relation to serving food or beverages by a restaurant, eating joint or a mess is determined as provided in rule 2C of the Service Tax (Determination of Value) Rules, 2006, it said.

“In the Union Budget 2015, no change has been made in these rules; therefore, any confusion is unwarranted. Further, as explained above, the rate of service tax on the specified portion of the amount charged for such supply which is 40 per cent continues to be 12.36 per cent (including cesses) at present i.e. 4.94 per cent. The rate of service tax, as discussed above, will continue unchanged till a date, which will be notified in due course,” it said.

Budget proposal

The debate started when Finance Minister Arun Jaitley, in his Budget speech, proposed hiking the service tax rate to 14 per cent, from 12 per cent plus education cesses. It was said that the ‘education cess’ and ‘secondary and higher education cess’ will be subsumed in the revised service tax rate. This means that there will not be any cess over and above 14 per cent.

“The new service tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill 2015,” the circular said, adding that till the time the revised rate comes into effect, the ‘education cess’ and ‘secondary and higher education cess’ will continue to be levied in the service tax.

The government will move the Finance Bill for consideration and passage during the second leg of the Budget session starting on April 20.

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