KNOW YOUR TAXES- AT A RESTAURANT

By CA Abhishek Muraliabhishekmurali@victorgrace.in

abhishekmurali@gmail.com

© 2014 A

bhishek Murali and V

ictor Grace &

Co

SO YOU GO IN AND YOU ORDER FOOD. THE BILL APPEARS AND…….. It looks like this

That’s awesome. Pay the bill, celebrate the meal with hi-fives(or something equally lame)

© 2014 A

bhishek Murali and V

ictor Grace &

Co

BUT SOMETIMES, THE BILL APPEARS AND…….. It looks something like this

© 2014 A

bhishek Murali and V

ictor Grace &

Co

DON’T WORRY, WE’RE HERE TO EASE THE PAIN. LET’S BREAK IT DOWN SHALL WE….FIRST THE GROSS VALUE

This part is fairly straight-forward. It is the basic value of the bill. The price you normally see on the menu.

The ‘Eat at just XYZ RATE!’ Yeah, it’s that rate as well

In short, this is the rate you normally expect to pay when you order

© 2014 A

bhishek Murali and V

ictor Grace &

Co

NEXT THE RELATIVELY NEW CONCEPT OF SERVICE CHARGES……

This is charged by the restaurant for services they render to you. THIS IS NOT A TAX. NOT MANDATORY

It’s a charge collected and normally meant to be distributed by the staff amongst themselves – tips basically

Its normally charged at 10% but it varies from restaurant to restaurant

Don’t argue about it, just pay it. Or enquire at a restaurant how much they charge before ordering

© 2014 A

bhishek Murali and V

ictor Grace &

Co

FOLLOWED BY SUB-TOTAL - ITS JUST A FREAKING SUB-TOTAL MAN! – BUT ITS IMPORTANT

Having a slide dedicated to a sub-total does seem a bit loony but the reason I’m doing this is to highlight the importance of this value

The subtotal is the actual value of the bill before taxes. It is the value the government will consider while levying the taxes that follow – ST and VAT

This is to highlight that if there is no service charge, taxes would be on the gross value

© 2014 A

bhishek Murali and V

ictor Grace &

Co

SERVICE TAX EH? I GOOGLED IT AND IT WAS 12.36% - I GOT A BARGAIN. YAY. WAIT, I BET YOU HAVE SOMETHING WISE TO SAY, DON’T YOU? – YES I DO

If you googled service tax and found it was 12.36% you were right, but for restaurants its charged at 40% of the rate – or at 4.94%(12.36% x 40%)

This 4.94% is levied on the sub-total – i.e. gross + service charges. This is a mandatory charge unlike service charge

This is done to segregate the service component of resto from the value of goods – this is CA stuff bro, ignore it

© 2014 A

bhishek Murali and V

ictor Grace &

Co

FINALLY WE COME TO VAT

This a state specific tax and varies from state to state. Some states levy it at 5% and some even at 20%. I have assumed it to be 12.5% in my example

It is a mandatory charge like service tax and it is computed on sub-total

And unlike service tax, it is computed on the full value of the sub-total. You do not get the benefits of the discount like you did with ST

© 2014 A

bhishek Murali and V

ictor Grace &

Co

CERTAIN SALIENT POINTS The VAT should ideally be computed at 60% of the

rate for the relevant state(12.5% in our example). This is because you have split the service component to service tax(when you charged ST at 40% of the normal rate). Ideally you should pay VAT only on the value of the goods and not the services; i.e. Balance 60%

However, for some strange reason this is not done and the government approves of VAT on the entire sub-total value. Hence, it would not be advisable to argue about this either

I hope this presentation was helpful to you. Please feel free to contact me if you have any questions. You may now enter a restaurant and tackle the bill like a boss

© 2014 A

bhishek Murali and V

ictor Grace &

Co

Thank You

By CA Abhishek Muraliabhishekmurali@victorgrace.in

abhishekmurali@gmail.com

© 2014 A

bhishek Murali and V

ictor Grace &

Co