Restaurants to pay tax on service charge imposed


New Delhi: With some hotels and restaurants still levying a service charge, the consumer affairs ministry has asked the Central Board of Direct Taxes (CBDT) to consider service charge as income while assessing the tax returns.

The move comes in the wake of reports that many eateries are still collecting the charge.

At present, some hotels and restaurants are charging a service charge in the range of 5-20 per cent, in lieu of tips, despite the government’s guidelines to make a levy of such charge as optional.

Consumer affairs minister Ram Vilas Paswan said that renowned hotel and restaurants have complied with the guidelines but consumer complaints are still being received through the national consumer helpline (NCH) about service charge.

He took to the Twitter and wrote, “Hotels/restaurants have been asked either to leave the column of service charge blank or mention on the bill that it is optional.”

In a series of tweets, he wrote, “In view of the seriousness of the issue, Dept. of Consumer Affairs has written to CBDT to consider inclusion of Service Charge while assessing Tax.”

He added that directions have been issued to the officers of Legal Metrology of all states to monitor the cases of charging more than the maximum retail price (MRP).

Ministry sources said there were reports that many restaurants had displayed at their entry that they collected 10% service charge.

However, on April 21, the consumer affairs ministry had warned eateries that charging customers for anything other than food and beverages “would amount to an unfair trade practice”.

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