After GST: Does one still have to pay service charge at restaurants?
The Goods and Services Tax has reduced the total amount payable for food bills but has left customers confused about the difference between service tax and service charge, the latter being still levied compulsorily in some restaurants.delhi Updated: Jul 07, 2017 20:12 IST
The Goods and Services Tax (GST) is here and along with several other queries, it has resurfaced the questions of whether to pay the service charge and why is it still being levied. What is service charge and how is it different from service tax?
According to Ministry of Consumer Affairs, Food and Public Distribution, service charge levied by the restaurants, is the voluntary amount paid by the customers, at their discretion. Service Tax, on the other hand, is payable to the government. However, many consumers, who thought that GST will list all taxes as one, are questioning restaurateurs about the addition of service charge. They are even posting photos of their bills on social media.
Megha Saraf, a Gurgaon resident, says, “Why do we have to pay service charge separately? I’m already paying the other two — state and centre taxes — then what’s the need to pay service charge too? I feel that a food bill is more confusing to understand now, and I’m unable to understand the logic behind paying anything more beyond GST.”
Some, when asked to pay the service charge went to the extent of arguing with the restaurant managers/owners. “Recently I went to a restaurant and saw a long queue at the billing counter. Most people were asking about the levied service charge. I think they are confused between service tax and service charge,” says Piyush Kant, an entrepreneur.
In our restaurant, service charge is compulsory and it’s been conveyed to our patrons. After GST, they are paying less on food. Earlier the total tax levied would amount to 20% and after GST, it’s 18%. Most of our customers are happy with this reduced tax but a few still come up to ask why are we imposing a service charge? — Shikhir Dhingra, restaurateur
In some restaurants, as per their policy, service charge is compulsory and therefore their staff often ends up explaining to the customers each time a bill mentions service charge above GST. “In our restaurant, service charge is compulsory and it’s been conveyed to our patrons. After GST, they are paying less on food. Earlier the total tax levied would amount to 20% and after GST, it’s 18%. Most of our customers are happy with this reduced tax but a few still come up to ask why are we imposing a service charge? There’s another uncertainty on the taxes levied on alcohol. Right now, we have to make a separate bill for alcohol in which customers are saving close to 6%. But alcohol will also be merged with GST soon,” says Shikhir Dhingra, co-owner of The Classroom in Sector 29, Gurgaon.
Separate bills for food and alcohol are creating confusion among consumers too. “We have people coming up with questions on why are we generating two bills. This is because alcohol is taxable under the state government. But customers are happy because they are paying less for booze than the pre-GST rates. As far as service charge is concerned, we struggle to make our customers understand that the money collected will not increase our profits but benefit our staff,” says Rahul Singh, owner, The Beer Café.
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