Infrastructure & Safety

Service tax only in AC restaurants; effective rate 5.6%


Restaurants without air conditioning facility will not charge any service tax from their customers while the ones with ACs will charge only on the 40 percent of the total bill amount, the Finance Ministry said Tuesday.

Restaurants, eating-joints or messes, which do not have the facility of air-conditioning or central-heating in any part of the establishment are exempt from service tax.

“In other words, only air-conditioned or air-heated restaurants are required to pay Service Tax,” the Ministry said in a clarification on applicability of the levy.

In case of air-conditioned or air-heated restaurants, “60 percent of the value is to be deducted from the total amount charged while applying the rate of Service Tax and tax is to be calculated on the balance 40 percent,” it added.

With the increase in the rate of Service Tax to 14 percent (subsuming the Education Cesses) from June 1, the effective rate of tax will be 5.6 percent of the total amount charged.


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