Service Tax in Restaurant

Restaurant Service

Definition and scope of Service:

[Section 65(105) (zzzzv)]―Taxable service, means any service provided or to be provided to any person by  a restaurant, by whatever name called, having the facility of airconditioning in any part of the establishment, at any time during the financial year, which has licence to serve alcoholic beverages, in relation to serving of food or beverage, including alcoholic beverages or both, in it premises.

Rate of Tax & Accounting Code:

Rate of Tax	Accounting	Code
Service Tax	12% of the value of services	00441067
Education Cess	2% of the service tax payable	00440298
Secondary and Higher Education cess	1% of the service tax payable	00440426
Other  – Penalty/interest	As levied or applicable	00441068

**********(Rate of tax is effective from 01.07.2012)

Valuation of taxable services for charging Service tax

Service tax chargeable on any taxable service with reference to its value shall,

— in a case where the provision of service is for a consideration in money, be the

gross amount charged by the service provider for such service provided or to be

provided by him;

Explanation 

(a) ―consideration :includes any amount that is payable for the taxable services provided or to be provided;

(b) ―money : includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value;

(c) ―gross amount charged  : includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit  notes or debit notes and book adjustment, and any amount credited or debited, as  the case may be, to any account, whether called ―Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.

******* ( Sec.67 of Finance Act,1994)

Clarifications issued by the Board/ Ministry:

 (As per vide  D. O. F. No 334/1/2012-TRU, dated 16/03/2012)

Restaurant service  –

The manner of determination of service portion in such an activity is very simple and is given in Rule 2C of the the Service Tax (Determination of Value) Rules, 2006 (as amended for the negative list).

In terms of the said rule value of the service portion shall be determined in the following manner-

Value of service portion….. In a Restaurant shall be…..40 %....of the total amount charged

‘Total amount’ above would be the sum total of gross amount and the value of all goods supplied free of cost for use in or in relation to the supply of food or any other article of human consumption or any drink, under the same contract or any other contract.

The gross price charged by the restaurant for the taxable service, including any portion shown separately e.g. service charge.  However the amount paid by the customer ex-gratia e.g. as tip to any member of the staff doesn’t constitute consideration paid to the restaurant and shall remain outside this levy.

Summary :

i.e.  Service tax charged in restaurant having A/C facility & licence to Serve Liquor will be

=             Total Amount Charged to Guest X 40% X 12.36%

=             Gross Price Charged to Guest X 4.944%

=             Value of F&B charged to Guest including Service Charge X 4.944%