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Restaurants barred from charging service tax

In January, the government had said that customers can choose whether or not to pay service tax on their restaurant bills. However, this voluntary approach had created widespread confusion. The restaurants had gone ahead and declared that anyone who does not want to pay service tax should stay away from the restaurants. It also resulted in heated exchanges between staff and customers at various restaurants. Keeping in view these unwanted developments, the government has now announced a new rule wherein restaurants are not allowed to levy service tax.

The announcement was made by Consumer Affairs Minister Ram Vilas Paswan. “Our Department’s view is that imposing service charge is an unfair trade practice and consumers need not pay. There is no definition of ‘service charge’ in law but taking service charge without discretion of consumers is an unfair trade practice,” said Paswan. With this new rule, the government has effectively ended all the confusion surrounding service charges levied by restaurants. Restaurants may have to update the prices in the menu in an effort to avoid any dent in revenue.

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