Taking cognizance of a complaint lodged by city-based social activist Ajay Jagga highlighting the charging of Value Added Tax (VAT) and the illegal levying of service charges by city restaurants and hotels, UT finance secretary Sarvjit Singh has asked officials to get the issue legally examined and submit a report in a week.
Ajay Jagga had raised the issue of applicability of VAT and service tax under the Finance Act, 1994. The central government, through an amendment of the Service tax Rules, 2006 has fixed that the service component in the bill of restaurants is 40%, which means goods component is of 60%. At present, VAT is being charged on the full value of the restaurant bill, which means there is double taxation on the 40% of the component of the bill of a restaurant. In the present scenario, VAT and service tax, are being charged on 40% of the invoice value. He claimed that due to this improper application of VAT, excess tax is being charged from every customer/consumer of a restaurant of any kind.