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Old 19th December 2012, 16:02   #16
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Default Re: Most hotels are overcharging in the name of VAT

I just checked a bill from the Oberoi, Bangalore. This was for a buffet lunch for 2. The Karnataka VAT of 14.5% is charged on the whole amount and the Service tax is correctly charged for 4.94%.
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Old 19th December 2012, 16:24   #17
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Default Re: Most hotels are overcharging in the name of VAT

I think the whole charging of VAT service tax and service charge fluctuates between how big the resto is.

Example at a local eatery here in Hyd,the bill is the items cost and 5% VAT thats it.So it is pretty confusing.

Also at places where there is self service you are charged for service charges.Weird.

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Old 19th December 2012, 16:24   #18
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Default Re: Most hotels are overcharging in the name of VAT

This is a bill from a very famous restaurant in Blore.

I cannot figure out that VAT has been calculated on which amount.

The pic is not clear, so putting details below.



Sub Total : 2145.00
Service Charge @ 10% : 214.50
Service Tax @ 4.94% :116.56
VAT @14.5% : 279.98


If its on 2145 , VAT should have been 311.02
If its on 40% of 2145, ie on 858 , VAT should have been 124.41

This seems to be 14.5% on 1930. Where they arrived at that is something I just cannot figure out !!

Most hotels are overcharging in the name of VAT-bill-.jpg
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Old 19th December 2012, 16:37   #19
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Default Re: Most hotels are overcharging in the name of VAT

This all depend on how serious the restaurant is in adhering to law and good business practices. The VAT rules are different for liquor and items like packaged mineral water served in restaurants. 14.5% is only a thump rule.
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Old 19th December 2012, 16:38   #20
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Default Re: Most hotels are overcharging in the name of VAT

While I can understand why the VAT amount is mentioned, why dont they just mention the gross price on the menu? Am I supposed to calculate when I am about to decide what to eat?!
Even in a Coffee day, a 69 rupee coffee turns out to be 85 rupees or so. It is only helping me save money as I dont feel like eating out much longer.

Quote:
Originally Posted by mannubhai View Post
If its on 2145 , VAT should have been 311.02
If its on 40% of 2145, ie on 858 , VAT should have been 124.41

This seems to be 14.5% on 1930. Where they arrived at that is something I just cannot figure out !!
In this case, it is calculated on 1930 (2145 - 215)> no point in levying VAT on the service charge is there?
In any case service charge is ridiculous. Is that not already factored in the food pricing?
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Old 19th December 2012, 16:42   #21
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by mannubhai View Post

Sub Total : 2145.00
Service Charge @ 10% : 214.50
Service Tax @ 4.94% :116.56
VAT @14.5% : 279.98


If its on 2145 , VAT should have been 311.02
If its on 40% of 2145, ie on 858 , VAT should have been 124.41

This seems to be 14.5% on 1930. Where they arrived at that is something I just cannot figure out !!

Attachment 1028988
The only way to arrive at 1930 is Sub Total (2145) less Service Charge (215) = 1930. Why they would do this is beyond me.

Quote:
Originally Posted by selfdrive View Post

In this case, it is calculated on 1930 (2145 - 215)> no point in levying VAT on the service charge is there?
In any case service charge is ridiculous. Is that not already factored in the food pricing?
Of course applying VAT on service charge makes no sense, but subtracting an equivalent amount from total is something I didnt follow. Curious case!

Last edited by Recompose : 19th December 2012 at 16:49.
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Old 19th December 2012, 16:43   #22
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Default Re: Most hotels are overcharging in the name of VAT

The barista outlet in my office charges 14.5% VAT on the subsidized coffee.So a Barista blast is 71.(62+14.5%=8=round off 71)

Regarding the 1930, a probable theory is VAT is on the goods sold.So out of the total bill Service Tax is calculated on your experience in the hotel.So the entire process of giving and selling you food is taxed.thats why the service tax is on 2360 and not 2145. VAT caters to your items sold so he sold you food.You consumed it.Service in a way may be intangible so that is ruled out and hence 2145-215 and on that figure the VAT is charged.

This link throws more light. http://flame.org.in/KnowledgeCenter/...estaurant.aspx


Service charge I think is mainly applicable to uptown restos and not regular family joints?

Anvancy

Last edited by anvancy : 19th December 2012 at 16:51.
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Old 19th December 2012, 17:04   #23
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by selfdrive View Post

In this case, it is calculated on 1930 (2145 - 215)> no point in levying VAT on the service charge is there?
In any case service charge is ridiculous. Is that not already factored in the food pricing?
Quote:
Originally Posted by Recompose View Post
The only way to arrive at 1930 is Sub Total (2145) less Service Charge (215) = 1930. Why they would do this is beyond me.

Of course applying VAT on service charge makes no sense, but subtracting an equivalent amount from total is something I didnt follow. Curious case!
The Service Charge is extra, and over and above the sub total of 2145 . My total bill came to 2755.

Sub Total ( food+beverages) = 2145
Service Charge : 214.50
Service Tax : 116.56
Vat : 279.92

Grand Total : 2755.98

My bigger question is, What is that Service Charge supposed to mean and why should I pay it ? How can a hotel force a customer to pay service charge, that also a whopping 10% in this case .
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Old 19th December 2012, 17:09   #24
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by mannubhai View Post

My bigger question is, What is that Service Charge supposed to mean and why should I pay it ? How can a hotel force a customer to pay service charge, that also a whopping 10% in this case .
Service charge is just tips. This way the hotel is guaranteed a further 10% income from your bill that goes generally into the general pool for managers, cooks, cleaners and not just the waiters.

Last edited by Recompose : 19th December 2012 at 17:10.
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Old 19th December 2012, 17:24   #25
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Default Re: Most hotels are overcharging in the name of VAT

Hi,

As already stated in this thread and I summarize:

a) Service Charge are voluntary charges by restaurants and are not controlled by govt. However Menu should mention this charge. (Typically 5 to 10% of food value)

b) VAT is applied on 100% of food charges (and probably on service charges too). This is at state govt. notified rate Typically 13.5 to 14.5%

Service Tax is applied only at restaurants that fulfill BOTH of below conditions:
1. Had air-conditioning in any time of the year.
2. Have license to serve liquor. (Irrespective of whether you consumed it or not).
Service tax is applied on 40% of food+service charges at rate of 12.36% or say 4.94% on 100% of food and service charges.
(There was a misconception that service tax has to be applied on only service charges that has been clarified by govt. of India but above 2 conditions should suffice before it is levied)

So we can save this 4.94% by not going to restaurants that have license to serve liquor, if liquor is not in our agenda


Regds
Anubhav
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Old 19th December 2012, 17:32   #26
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by Recompose View Post
Service charge is just tips. This way the hotel is guaranteed a further 10% income from your bill that goes generally into the general pool for managers, cooks, cleaners and not just the waiters.
Agreed of the concept. But in a case, where the customer does not want to give the tips, may be because he is unhappy with the service/bad food/etc etc , how can he be forced to tip them ?
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Old 19th December 2012, 17:37   #27
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by Recompose View Post
Service charge is just tips. This way the hotel is guaranteed a further 10% income from your bill that goes generally into the general pool for managers, cooks, cleaners and not just the waiters.
Yes, but at least a part of the service charge should be left to the discretion of the customer. 10% is excessive considering the service we get at some places. At some others, if there is no fixed charge, I may want to pay 10%.
It may be better to have a number nearer to 5%. Now I have stopped tipping altogether, and will probably soon get to a stage where I will reduce patronising such places with service charges. I also make it a point to tell the manager/ owner if I have spoken with him before this is the reason I wont return. If he gets such comments from a sizeable number, he may reconsider the amount he levies as service charge. And if he doesnt care and still offers shoddy service, I dont want to go there anyway!

Last edited by selfdrive : 19th December 2012 at 17:39.
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Old 19th December 2012, 18:37   #28
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Default Re: Most hotels are overcharging in the name of VAT

Quote:
Originally Posted by selfdrive View Post
Yes, but at least a part of the service charge should be left to the discretion of the customer. 10% is excessive considering the service we get at some places.
A place like BBQ nation in Bangalore, started charging Service charges in the bill around a year ago. It was 4% of the total bill. If 2 people eat there, the bills comes to around about of 1500 incl beverages. 4% would be Rs 60, which sounded reasonable.

In this case of the bill I put, the SC is 276, which in any case is way above what I would have paid them. At best I would have paid a tip of Rs 100 for a good service.

And the most strange fact is, many restaurants with buffet charge you SC. Its as good as self service, and I still need to pay for service ???
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Old 19th December 2012, 19:26   #29
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Let us first take out Service Charges, which is nothing but a tip. So, you need not pay any tips. This practice was prevailing in tourist places, now it is being followed every where.

Government of India is trying to introduce GST, which is Goods & Services Tax, since 2009. Thanks to strong opposition from state governments ruled by opposition parties, it is still pending.

The problem is related to revenue sharing, as Service Tax goes to Central & VAT to State govt. Once, implemented, the confusion will go - not only to the general public, but also to the government.

On the contrary, you cannot be charged twice for the same service and that's the logic. If the Service Tax is charged on 40% of the Bill, then VAT should be charged on the remaining 60%. But the state governments are happy with what ever the merchants charge to the customers.

As. some one has mentioned, if a particular restaurant is charging extras, express your dissatisfaction and avoid. The restaurants can opt for Composition of Tax (COT), but few take it as VAT benifits them with Tax Credit.
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