• Feb
  • 05
  • 2013

Cut Down The Meals To Save Taxes?? Cascading Effect Really Out Of the Picture??

Monisha Jain

The posh restaurants these days have a highly priced menu for the varieties of cuisines offered by them. These high prices are a symbol of their quality and taste standards, and this is what they try to project. But how far is that true??? Let’s assess it. 

While the middle class families of India save and plan well in advance for a dinner outside on a Sunday the kids of the family find it no small a occasion to rejoice and remember and in spite of all the excitement and prior planning and savings they return with a half or partially full stomach letting their excitement and rejoice to make up for the rest!!! Is that the way it is meant to be?? Is the reason behind this only the high prices?? Or is there something else as well?? Well! The high TAXES, SERVICE CHARGES are of equal prominence and thus require equal or rather more footage in the scene. The service charges vary for each restaurant and thus are discretionary in nature which normally ranges from 5-10% the taxes levied are both service tax and vat. They are each levied in a different manner. Service tax is levied on 40% of the gross amount including the service charges and that’s how the service tax rate of 12.36% appears as 4.94% which a few of us notice while scrutinizing the bill. This scaling down of the rate is due to the abatement provided on suc composite services by the central government in section 93(1) of the Finance Act, 1994 which is the statute for levying service tax. But, unlike service tax VAT is levied on the gross amount of the bill not differentiating the cost of the actual goods and the cost of the services provided to us which blooms up the bill. The high VAT rate of each state on the already high priced cuisines is a matter of serious concern. this needs to be noted and must be changed as there is no point in paying VAT on services as well when we are separately paying service tax .

This spoils the ultimate reason for the implementation of VAT which was to eradicate the cascading effect of the previous system. But here we see the cascading effect and multiple taxation in the picture again.


One Response to “Cut Down The Meals To Save Taxes?? Cascading Effect Really Out Of the Picture??”

  1. Ashok Shah says:

    If total amount of TAX i.e. vat plus service tax is calculated as a percentage of total amount of bill (pre tax), it roughly translates to around 24%. This is too much.

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