Service tax only in AC restaurants

Tribune News Service

New Delhi, June 10

Restaurants without air conditioning facility will not charge any service tax from their customers while the ones with ACs will charge only on the 40% of the total bill amount, the Finance Ministry has clarified.

According to the clarification, restaurants, eating-joints or messes, which do not have the facility of air-conditioning or central-heating in any part of the establishment are exempt from service tax.

“In other words, only air-conditioned or air-heated restaurants are required to pay service tax,” the government said.

In case of air-conditioned or air-heated restaurants, “60% 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%,” it added.

With the increase in the rate of service tax to 14% (subsuming the education cess) from June 1, the effective rate of tax will be 5.6% of the total amount charged.

Prior to June 1, when the rate of service tax was 12.36% (including education cess), the effective rate was 4.94%.