Get ready to fork out new service tax at all AC restaurants

Even as summer is setting in, consumers will have to think twice before stepping into an air-conditioned (AC) restaurant from now on. The price of food items are already up because of inflation and the announcement on service tax on AC restaurants would now push it further.

Finance Minister P. Chidambaram, in his Union Budget on Thursday, announced that service tax will apply to even those AC restaurants that don’t serve liquor. “The distinction is artificial (between restaurants that serve liquor and those that don’t),” the Minister said, with reference to the service tax that was levied two years ago on AC restaurants that serve alcohol.

Needless to say, this has left a bitter taste in the mouths of hotel owners and diners alike.

Ramamurthy K, treasurer of the Bruhat Bangalore Hotel Owners’ Association, told The Hindu, there are roughly 6,000 eateries (over 1,400 of them are members of the association) in Bangalore. “Of these, 40 per cent would be really small outlets, while the remaining 60 per cent are restaurants. Of the approximately 3,500 restaurants comprising the 60 per cent, at least 2,000 have AC sections,” he said. He said in the cities, ACs were “no longer a luxury, but a necessity”. “There is already a 20 to 30 per cent difference in the bills of AC and non-AC servings,” he said. Mr. Ramamurthy went on to say that restaurants are being “targeted”, pointing out that vegetable retail outlets (some of which house salad bars as well) are also air-conditioned.

Double tax

Association general secretary P.C. Rao said the consumers in Karnataka will end up paying two types of taxes while eating out now — the 14.5 per cent VAT (value added tax) and service tax. “It is not even like the service charge that some restaurants collect. All restaurants will have to make their diners pay the service tax,” he said.

Reality bites

Diners also have not taken kindly to the service tax. Anirudh M.M., a consultant at a private bank on Cunningham Road, said he lunches at a restaurant almost every day. “But we spend a little extra once a week to enjoy an AC enclosure. But from now on, I will try going in a group, so we can split the extra charge because anyway I end up paying 25 per cent extra on the food if I eat in the AC restaurant.”

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