Anupama
in Consumer Law Cyber Law
Asked January 15, 2014

Compulsory Service Charge in Restaurant

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Can compulsory service charges be included in the bill in a restaurant? Also can service charge and service tax both be charged at the same time?

Answer 1

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Jayanth Ravi

Service charges are different from service taxes in that they do not go to the government. Service Tax is compulsory as per Taxation Laws, while many restaurants also levy service charges at 10% which is supposed to be distributed among the waiters based upon restaurant policy which can vary. Service charges can be included in the bill, only if the menu has mentioned so. When service charges are levied, it is as a substitute to tips, so you are not expected to pay additional tips in such a case.

Yes, service charges can be levied along with service tax at the same time, since it would be mentioned so in the menu and hence it forms part of the terms of the contract that you’re entering into with a restaurant when you choose to order an item. But in Chandigarh, it has been held by Authorities that levying service charges over and above service tax and VAT is an unfair trade practice and so declared illegal and punishable with a jail term.

References:

http://www.moneycontrol.com/news/tax/knowing-service-tax-service-chargevatrestaurant-bill_5963701.html

http://www.tribuneindia.com/news/chandigarh/it-s-official-service-charge-illegal/216686.html

Agree Comment 0 Agrees about 2 months ago

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