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1.0 Introduction
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9/3/2018 GST on Service Charge in restaurants - How GST is charged on invoice in
However, now the GST shall be applicable on every component of the bill and
which shall include the service charge as well. Let us proceed on to discuss it in
detail.
Many people confuse themselves between a service charge and service tax,
however; both these terms are completely di erent from each other. Let us
understand each of the terms:
Service charge is the charge levied by the restaurant on all the bills and the
same is distributed between the sta and the waiters who work there. It is
can be understood as a tip. The rate of the service charge is 10%.
Service tax is the indirect tax levied by the central government and collected
in the manner as prescribed. From 1st July, the service tax has ceased to
charge and shall be subsumed under GST. The rate of service tax was 15%.
The service charge has been brought into GST tax net w.e.f 1st July 2017. Now, the
restaurant, bar, café, hotels shall have to charge GST on the service charge
component as well to avoid any penal action from the government.
In the existing VAT laws, service charge component was free from VAT liability,
this is because service charge does not form part of restaurant revenue, rather it
is distributed among the sta member, waiters etc.
https://www.hubco.in/articles/gst-on-service-charge-in-restaurants-how-gst-is-charged-on-invoice-in-restaurant-hotels-cafe-and-bar-on-service-ch… 2/5
9/3/2018 GST on Service Charge in restaurants - How GST is charged on invoice in
If the restaurant is neither Air conditioned nor liquor is served, then GST rate
is 12%.
If either liquor is served or AC facility is there, then GST rate is 18%.
If the restaurant is in the ve-star hotel, then GST rate is 28%.
Mr A went to a restaurant in Delhi and ordered food along with liquor. After
having his dinner, he asked for a bill. His bill was as under:
Food Rs.500
Liquor Rs.1000
Service Charge @10% Rs.150.
A. GST in India is not applicable on alcohol made for human consumption and
therefore, GST shall not be calculated rather VAT shall be calculated on it. Hence,
the GST of 18% shall be charged on Food (Rs.500) and service charge of Rs.150.
7.0 Conclusion
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