Service charge

Dear Bhushan,

1) As an Auditor u can test check these payments if 100% checking is not possible.

2) It is treated as part of their wages/salaries

3) Now the amount to be paid is identifiable at the time of collections from the customer then u hcan follow either of the following method -

                  a) First Income & Then Expense

                  b) Simply show the Income as Net of expense.

whereas if the amount payable is not identified at the time of collectin from the customer then it should be shown as "First Income & Then expense"

4) No statutory obligation, it is the understanding between the hotel owner & the workers.

hey Aamir thanks for ur suggestion. but in the ESIC write up.i learnt that SERVICE CHARGES Service charges are collected by management of the hotel on behalf of their employees in lieu of direct tips and the same is paid to their employees at a later date. Such amount collected as ‘service charges’ will not constitute wages under Sec.2(22) of the ESI Act. In the case of ESIC Vs. M/s.Rambagh Palace Hotel, Jaipur, the High Court of Jaipur has held that ‘service charges’ are not wages under Section 2(22) of the ESI Act. This verdict of the High Court of Jaipur was accepted in the ESIC and hence no contribution is payable on ‘service charges. (Earlier instructions were issued vide letter No.P-12/11/4/79-Ins.Desk.I dt. 18.9.79)

Dear Bhushan,

Thanks 4 sharing this infot I was not aware of this thing.

But still brother "Direct Tips will not be regarded as wages for the purposes of ESI Act only"

I said it as per the general understanding & not in respect of specific act like ESI in this case..

But thanks 4 sharing.........