Restaurants without air conditioning facility will not charge any service tax from their customers while those with ACs will charge only on the 40 percent of the total bill amount, the finance ministry said on Tuesday.
"Restaurants, eating joints or messes which do not have the facility of air-conditioning or central air-heating in any part of the establishment are exempt from service tax," the ministry said in a clarification.
"In other words, only air-conditioned or air-heated restaurants are required to pay service tax," the statement said.
For such restaurants, 60 percent of the value is to be deducted from the total amount charged while applying the rate of service tax, and tax is to be calculated on the balance 40 percent, it added.
With the increase in the rate of service tax to 14 percent from June 1, the tax rate is effectively 5.6 percent of the total amount charged.
Finance Minister Arun Jaitley in his budget proposed to raise service tax from 12.36 percent (including education cess) to 14 percent. The tax is levied on all services, except a small negative list.
