Restaurants may soon have to pay tax on service charge

Eateries still forcing customers to pay service charge may be subject to tax liabilities.

New Delhi: Despite the government clarifying early this year that service charge on a food bill is not compulsory and a customer can choose to have it waived if not satisfied with the experience, some eateries are still asking making it mandatory for the guests.

As per a report in the Times of India, such eateries may be subject to tax liabilities.

“The Union consumer affairs ministry has asked the Central Board of Direct Taxes (CBDT) to ask officials to take into account service charge collection by hotels and eateries while assessing their tax liabilities.”

The TOI report, quoting officials, further said that restaurants still continuing with compulsory service charge “must come out with a white paper to prove they were distributing the collected amount to the staff. If not, the collection should be taken into account as part of their income”.

Meanwhile, in a series of tweets consumer affairs minister Ram Vilas Paswan wrote:

Hotels/restaurants have been asked either to leave the column of Service Charge blank or mention on the Bill that it is optional. — Ram Vilas Paswan (@irvpaswan) September 12, 2017

Guidelines were issued in April 2017 to Hotels/Restaurants for not levying Service Charge compulsorily. — Ram Vilas Paswan (@irvpaswan) September 12, 2017

Complaints against those insisting payment of Service Charge compulsorily are being received through NCH and are being reported in Media. — Ram Vilas Paswan (@irvpaswan) September 12, 2017