On the service charges, the provision in the law allows the restaurants to impose the GST, as stated by the Finance Ministry. The same indication would arrive as a legality dispute of the services of the service charges would be litigated in Delhi High court.
If the restaurants would be qualified for the GST charge on the service charge filed via the customer and if the GST council or the Government has provided any permission for these types of levies, AKP Chinraj, Member of Parliament from Tamil Nadu sought.
Minister of State for Finance, Pankaj Chaudhary while answering him stated that according to Section 9 of the CGST Act, 2017, GST is levied on the supply of goods or services on the value as decided under Section 15 of the CGST Act, 2017.
“According to Section 15 of the CGST Act, 2017, any amount charged by the supplier for anything done by the supplier in respect of the supply of goods or services forms part of the value of service,” showing that GST could be imposed on the service charge.
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At a specific rate, the majority of restaurants would collect the service charge and add it to the value of the food that has been supplied. The GST would get imposed on the gross amount. Restaurant service supply excluding hotels or premises securing a room tariff exceeding Rs 7500 would get levied with 5% tax with no Input tax credit and restaurant supply service at hotels securing a room tariff surpassing Rs 7500 per day shall get taxed at 18% with ITC.
Regarding the concern of the service charges, there are issues since various customers feel the same like a tax. Via service charges, the collected money goes to the restaurant’s box that they claim would get distributed to all the workers of the restaurants under the concern of welfare measures. As per the restaurants they used to print the service charge rate on the menu and indeed place a board on the charge applicability.
Rules of CCPA
The Central Consumer Protection Authority (CCPA) in July last year provided the rules which specified that the service charge would get imposed that summed to the total cost of the items specified in the menu and the subjected taxes, sometimes in the cover of additional fee/charge. Moreover the same would have been specified that an element of the service would be within the cost of food and beverages provided through the hotel/restaurant. The cost of the product hence covers the goods and services.
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“There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers. Thus, placing an order involves consent to pay the prices of food items displayed on the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the Act,” the Authority expressed.
Delhi High Court rules were being challenged, and the order has been stayed on July 20 complying which several restaurants would impose the service charges as per the framework made by the court. For raising the interim stay an application has been furnished via the government. In the former hearing dated 15th Feb the court would state that if the major case would not get heard on the subsequent date which is 12th April, the bench will acknowledge the applications for vacating the interim stay.
