Service tax and Sales tax.

Of late the topic that's been spoken about most often once your bill arrives the dinner table at a restaurant  is service tax and sales tax. Two words that seem similar to a person who has no idea of it. Let us first understand what both mean exactly. 

According to wikipedia service tax is defined as "Service tax is a part of Central Excise in India. It is a tax levied on services provided in India, except the State of Jammu and Kashmir. The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC)."

According to investopedia service charge is defined as A type of fee charged to cover services related to the primary product or service being purchased. For example, a concert venue may charge a service fee in addition to the initial price of a ticket in order to cover the cost of security or for allowing electronic purchases. Another example would be a fee for using the ATM of a competing bank.

From calculation point of view the "service tax" amount is charged on the service charge @4.94% and not the items consumed. Most of the hotels tend to misguide their customers on this point.They calculate service tax on the items consumed. The difference here is huge. This thereafter becomes an income to the owners.

Here is an example to illustrate this.

Food and beverages			Rs. 2,000
Service charge			Rs. 200
Service tax 4.94%			Rs. 9.88
Total			Rs. 2,210

This is how the charges are actually suppose to be. But what most of the hotels do is given below.

Food and beverages			Rs. 2,000
Service charge			Rs. 200
Service tax 4.94%			Rs.108.68
Total			Rs. 2,309

There is Difference of Rs.99 this becomes a income for them. So now the next time you at a hotel with a bill in your hand you know exactly what to do.