Recently the Customs & Central Excise Department has issued an advertisement to clarify that on what amount service tax is charged on the restaurant bill.

The total bill is decoded to analyse as to which amount is chargeable to service tax.

In the total bill charged by the restaurant owner, the ingredients are:

• Billed amount
• Service charges
• VAT

It has been clarified that Service tax is to be charged on the billed amount + service charges and VAT is not to be included while calculating Service Tax.

Thus, Service tax is charged @ 12.36% of 40% i.e. 4.94% of the bill representing service portion only (billed amount + service charges) and VAT is to be excluded from the value while calculating the service tax payable. Hence service tax is not chargeable on VAT.

The copy of the advertisement is annexed herewith for your kind reference.