Here's what Service tax, service charge and service tax number mean for your food bill

How many times have you looked at restaurant bills closely? We just check the items which are being charged, pay the total amount and leave. 

If you look at it properly, there are three different things which are important apart from Value Added Tax (VAT) and Cess. They are: Service Charge, Service Tax and Service Tax number. 

Department of Consumer Affairs, earlier this year said that the service charges, which restaurants include in addition to taxes, are optional. Simply put, you can refuse to pay service charge if you did not find the service up to the mark. 

Service charge is amount charged by the restaurant for providing services to customers. Nowadays restaurants charge a flat 10% service charge on your bill. 

The ministry, on January 2, stated that "service charge is payable only on the consumer’s discretion and can be waived off if the customer is not happy with the service."

"Service charge is a completely voluntary levy by restaurants and it it not regulated by the government. Restaurants are at will to levy it. Service charge rates or % are not defined by an law/act," Archit Gupta, Founder & CEO of ClearTax told Zeebiz.

However, service charge and service tax are not to be confused with each other. 

Service tax on a restaurant bill has been laid down in the Service Tax Act. Rates and manner of levy, and how to deposit it has been defined in the Act. Service tax returns are required to be filed, the details of which are also defined, Gupta explained.

The service tax remains same in the whole country while service charge depends on the restaurant. 

Apart from service tax and service charge, what is important to look at is Service tax number. Service tax number is required for those who deduct & deposit service tax, it is like an identification. Each payer has a number, which is used to deposit service tax and file service tax returns.

If a bill does not include service tax number, the restaurant is not allowed to charge service tax. The number has to be written on the invoice copy. 

For instance, your food bill comes to Rs 1,000. The service tax will be applied on 40% of the food bill. Which means, 6% of the total bill will be charged. 

Thus, on food bill of Rs 1,000, the service tax amount will be Rs 60. The service tax is charged only on food items and not on alcohol. 

If service tax is charged without service tax number, it becomes a non-bailable offence under Section 89 of service tax. 

According to Section 89 of Finance Act, the person could be jailed for up to one year or up to two-three years if in case the amount involved is above Rs 50 lakh. 

Next time when you visit a restaurant, make sure you check the Food bill properly.