Delhi Restaurants Come Under Scanner For Levying VAT On Service Components

Ever wondered why the menu says 150/- but the bill demands 300/-? The simple answer to that is taxes. VAT, Krishi Kalya, Swachh Bharat, Service Taxes and Services Charges make up for a prominent chunk of restaurant bills. But two law students have raised their voices against the practice; following which, food bills may ease up a bit is the Delhi High Court rules in favour of their petition.

The petition states that restaurants are imposing value added tax (VAT) even on the service components of the food bill a.k.a. service tax and service charge. This invariably results in a massively inflated final amount. Heeding to the complaint in the petition, a Delhi High Court bench comprising Chief Justice G Rohini and Justice Sangita Dhingra Sehgal has issued a notice to the Delhi government to respond on the matter and fixed Oct. 3 as the next date of hearing, reported International Business Times.

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While submitting the petition, Anish Agarwal and Avi Tandon, who study at the reputable National Law University, Jodhpur, cited provisions of the Service Tax (Determination of Value) Rules, 2006 to buttress their argument, according to the Bar & Bench.

According to Rule 2C, the service component of food bills is tacked at 40 percent in places where “goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied…” This means that restaurants can charge VAT (at 20% on alcohol and aerated drinks, and 12.5% on other food items and beverages) on only 60% of the bill, whereas some Delhi restaurants are gallantly imposing it on the total bill amount.

The petition further requests the Delhi High Court to not only intervene in the unfair tax practices but to also issue appropriate circulars to the outlets that they should charge VAT only on the goods component of their bills.

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Speaking of which, the Goods and Services Tax (GST), as reported earlier, will take the place of all the taxes to bring in more transparency in the entire billing practice.

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