With the implementation of the Goods and Services Tax (GST) in India, various issues have arisen regarding the applicability of GST on different services. One such issue is the applicability of GST on service charges levied by restaurants in addition to the cost of food and beverages served. This article aims to clarify the legal position on the same.
Service charges are an additional amount levied by restaurants on the cost of food and beverages served, ostensibly as a charge for the services provided by the restaurant. The amount of service charge is usually a percentage of the total bill, and can vary from restaurant to restaurant.
No, service charge and GST are two different charges. GST is a tax levied on the supply of goods and services, while service charge is an additional charge levied by the restaurant for the services provided. However, confusion has arisen in the past regarding whether service charge is a part of the total bill and is hence subject to GST.
In January 2018, the Central Board of Excise and Customs (CBEC) issued a circular stating that service charge levied by restaurants is not a part of the cost of food and beverages served and hence is not subject to GST. The circular clarifies that service charge is an amount collected by the restaurant on behalf of its staff for the services provided by them, and is hence not a consideration for the supply of food and beverages.
Further, the circular states that the restaurant must clearly indicate that service charge is not mandatory, and that customers can choose to pay it or not. If a customer chooses not to pay service charge, the restaurant cannot refuse to provide services or goods.
There are no exceptions to the legal position stated by the CBEC circular. However, it is important to note that if the service charge is not clearly indicated and is included in the total bill, it will be considered as part of the cost of food and beverages and will hence be subject to GST.
The legal position on the applicability of GST on service charges levied by restaurants is clear – service charge is not a part of the cost of food and beverages served and hence is not subject to GST. However, it is important for restaurants to clearly indicate that service charge is not mandatory, and for customers to be aware that they have the option of not paying service charge.
With the implementation of the Goods and Services Tax (GST) in India, various issues have arisen regarding the applicability of GST on different services. One such issue is the applicability of GST on service charges levied by restaurants in addition to the cost of food and beverages served. This article aims to clarify the legal position on the same.
Miscellaneous Provisions under Revised Draft GST Law
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