Arun Jaitley, Finance Minister of India announced hike in the service tax in the union budget this year. Effective from 1st of June, 2015 service tax had been increased from 12.36% to 14% which also includes education cess, which has its impact on categories like railways, airlines, banking, insurance, advertising, construction, event management, movies, phone bills, grocery, shopping and also EATING OUT.
Following the confusion and some reports of overcharging after increase in service tax from June 1, Finance Ministry clarified that service tax will be levied only on air-conditioned restaurants.
Finance Ministry said, “Restaurants, eating joint or messes which do not have the facility of air-conditioning or central air-heating in any part of the establishment are exempt from service tax.”
Finance Ministry also clarified that even the ac-restaurants will levy service tax on 40% of the total bill amount.
In case of air-conditioned or air-heated restaurants, “60% of the value is to be deducted from the total amount charged while applying the rate of service tax and tax is to be calculated on the balance 40%”, it added.