The Department of Consumer Affairs has written to Central Board of Direct Taxes (CBDT) to consider service charge levied by restaurants and hotels as income while assessing their tax returns. This was done after reports of several establishments charging service charge came in.
If CBDT decides to act according to recommendations from Department of Consumer Affairs, this could mean a great tax blow to eateries still taking service charges from their patrons. Government orders earlier this year had made any such charges optional.
Guidelines directing hotels and restaurants not to levy service charge compulsorily were issued by Department of Consumer Affairs in April under Consumer Protection Act. Eateries have been instructed to leave the column of service charge in their receipts blank or mention that it is optional. Several renowned hotels and restaurants have made service charge optional as per the guidelines, according to a tweet by Consumer Affairs Minister Ram Vilas Paswan .
However, customers are being asked to pay service charges to the tune of 5 to 20 per cent, according to a PTI report. The National Consumer Helpline (NCH) has received several complaints of some eateries collecting service charges, Ram Vilas Paswan mentioned in one of his tweets.
"In view of seriousness of issue, Department of Consumer Affairs has written to CBDT to consider inclusion of Service Charge while assessing Tax," Ram Vilas Paswan said in one of his tweets.
The Department of Consumer Affairs has also urged the voluntary consumer awareness organisations to spread awareness about service charge and pick up some cases for remedial action. Moreover, offices of Legal Metrology in all states have been instructed to keep an eye on cases of sellers asking for prices exceeding the printed MRP.