30 October 2013
There are two aspects to the business of a restaurant. VAT is a state subject and the rates vary from state to state in India. Service Tax is a Central Subject and is levied by the Union Government and is applicable at the same rate all over India.
The restaurant sells the food items served and this is a sale of goods or commodities. On the value of such sale of goods or commodities state VAT is applicable - in your problem @4%.
With effect from 01.04.2012, any air conditioned restaurant is rendering taxable service and is liable to service tax under the head 'Restaurant Services." Service tax is however leviable @ 12.36% on 40% of the bill since there is an abatement of 60% for "Restaurant Service".
CAclubindia
