Lack of clarity in service tax increase!

By | April 1, 2013

Lack of Clarification on the Increased Service Tax, Adversely Affecting the Budget of the Consumer

The increase in the service tax proposed in the Union Budget, has taken a rather ambiguous path, leaving the restaurant industry in a fix


The Union Budget was a mixed bag, consisting of some very wise moves and a plethora of disappointing ones. Among the examples of the latter type, was a decision which looked adamant on making the consumers shell out more of their hard earned money, and that too in the process of fulfilling some of their basic requirements. The budget levied extra service tax, on all air-conditioned restaurants, which had direct negative implications for the consumer. While the move itself was a challenge for the consumers and the restaurant industry, the ambiguity in the definition of an air conditioned restaurant is making things further difficult.

Experts believe that the air-conditioned restaurants mentioned in the budget 2013-14, should ideally point towards the higher end restaurants, which incorporate a significant amount of service making them eligible for increased tax. Although the opinion sounds logical, the absence of any segregation on the basis of the operational structure of the relevant restaurants has left, all restaurant owners pondering over, whether or not to apply the tax. Takeaways, small canteens and other round the corner food centers, do not entail a great deal of service, and have thus generally been out of the scope of the restaurant industry, but the government’s callous approach, has led to these centers levying the increased tax on their customers, making them lose their primary objective, of serving simple and quality food at a low price.

The industry has asked for a clarification regarding the issue, and a reply along with a clear structure as to the application of the increased tax, is expected to come out soon. But with most restaurant owners, be it the high end ones or the ones from the regular category, not taking any risk, customers will definitely have to carry the extra burden of paying a significantly higher price for eating out.

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