Tax on food in restaurants
Every time you go and dine out in a restaurant, the food bill turns out to be higher than anticipated. Furthermore, when you dive through the bill in detail to cross-check the charges levied, you realise that there are a whole lot of charges which have been levied on the food bill.
The value-added duty basically was before the goods and services duty came into the picture. Services duty is also used to exit before GST wherein the services provider eventually passes the quantum to the government. The number of levies and charges on the bill can be confusing to anyone who doesn’t understand the taxation system.
GST on food services in the restaurant
- 5 GST on food services handled by restaurants.
- 5 GST on eatery services including room service and takeaway handed by caffs located within a hostel.
- 5 GST on any food served at a restaurant on a contract basis.
- 18 GST on food services including delivery of food handled by a restaurant joint located within the demesne of the club, guest house, etc.
- 18 GST applicable to all cafeteria services handled.
Effects of taxes on restaurant and food items
It's notable that, under current GST rules, this ITC benefit is available only to those charging 18 GST, while cafes charging 5 GST on food services do food services that don't admit ITC benefits. After the commencement of GST, a simplification of the bill was witnessed by those eating out at cafes, as eatery GST replaced multiple levies. Still, the service charge has not been affected by GST and is still applied by the eatery.
Service duty on food served in cafes
Although we don’t mind, we always mention our restaurant bill having service tax and service charge. And a few times, we also think that the restaurant is charging beyond original value. Service tax is another type of tax levied by the central government and is compulsory. However, the service charge depends on the restaurant. In extreme cases, you can negotiate it.
The charge for the food served in a restaurant is a compound charge for the food as well as for the services. Service duty should be charged only on 40% of the food bill and not on the total bill and 6% service duty on restaurants shall be chargeable.
VAT on food bill
As per the service duty rules, service duty on food served in cafes is chargeable on only 40 of the food bill. Now, Handbaskets should be charged only on 60% of the food bill as service duty has formerly been charged on 40% of the food bill.
Sometimes restaurant bills shock us with the tax and service charges. For those who don’t understand the taxing system, things can get a little bit confusing. However, all that matters for you is the service charge, the only thing that depends upon the restaurant. I hope this article managed to demystify the bill and gave you a proper idea of how much tax is on food and drink in a restaurant.