New taxes and charges have led to a rise in restaurant bills by 25-30 per cent.
The badges worn by waiters at a leading Mumbai restaurant got Shaheen Dawood inquisitive. They read, 'no tips please'. Used to paying five to 10 per cent of the bill as tips, Dawood enquired. She was told the restaurant charges 10 per cent as service charge. In other words, whether she was happy or not with the service, Dawood was still going to shell out 10 per cent — not fair, she thought.
The costs of eating out have increased substantially, due to taxes by both central and state governments. Sometimes, they inflate the bill by a good 20-25 per cent. On a bill of Rs 2,000, there is value-added tax (VAT) of 12.5 per cent, then a service tax of three per cent on the billed amount, plus VAT, another three per cent of service tax as education cess and, sometimes, a service charge on the billed amount. Now the new amount to be paid is, Rs 2,519.5 - a good 25 per cent more. And, we are not even talking liquor bills, which attracts a massive 20 per cent on beer and wine.
| KNOW YOUR CHARGES |
| VAT: It varies across the country and is charged as a percentage of the bill amount Service tax: Charged by a/c restaurants with a licence to serve liquor at 3% of the bill amount, plus VAT Education cess: Levied on the service; may be split as 2% (education) and 1% (higher and secondary education) Service charge: Equivalent of a tip and may or may not be charged |
Of course, these taxes may differ from state to state. In Maharashtra, the VAT is either 12.5 per cent (non-composition, that is charged separately) or four per cent (composition, meaning built in the maximum retail price). In Gujarat, it is a flat four per cent. The differential rates or new elements confuse many.
Pradeep Menon, for example, was surprised to see three per cent education cess. He says he'd heard about it but did not know it was applicable for restaurants as well.
Industry associations says costs earlier borne by hoteliers are getting passed on. Kamlesh Barot, president, Hotel and Restaurant Association (Western India) explains, “Education cess is levied on the income tax of hotel properties'. Hotels are supposed to pay it from their profits.” Lately, hotels/restaurants have started billing it to the customer.
Service tax is a recent addition to the list of additional charges. A three per cent service tax was introduced in the Budget this year and five per cent for hotels (charged on room rates).
The new one that has stumped many customers is the service charge. S P Jain, managing director of Pride Hotels, says, “Service charge is used by the hotel/restaurant management partly to pay employees and partly to fund breakages (by employees).” The charge can vary from 2.5 per cent to over 10 per cent.
Of course, it is possible some restaurants don't indicate any tax amount and just write that prices are inclusive of all taxes. This and the 'plus-tax' computing system are government approved. You may not be overcharged, as restaurants/hotels have to report to the tax authorities, giving a break-up of the menu price and tax charged.
