Eateries to pay tax on service charge

Govt directs CBDT to consider it as income

Restaurants continuing to ignore guidelines on service charge will now face government action.

For, the consumer affairs ministry has asked the Central Board of Direct Taxes (CBDT) to consider taxing such restaurants for the additional collection.

The government's guidelines, issued in April, had asked restaurants to keep service charge purely voluntary.

"Given the seriousness of the issue, the Department of Consumer Affairs has written to the Central Board of Direct Taxes to consider including services while assessing income tax," Consumer Affairs Minister Ram Vilas Paswan said.

Though many renowned restaurant chains have complied with the guidelines, the ministry continued to receive complaints of some outlets imposing service charge on customers.

The guidelines had asked restaurants to leave the service charge column on the bill blank so that customers can fill the amount depending on the quality of service. Outlets have also been told to display messages informing customers that service charge is optional.

The ministry has also directed Legal Metrology officers in all states to monitor cases where restaurants charge more than the MRP rates.

In its letter to CBDT, the ministry said service charge should be considered part of the restaurant’s income and attempts to hide it should be treated as tax evasion.