At old service tax rate, the effective rate of taxation came to 4.94 per cent of the food bill and at the higher rate of 14 per cent it comes to 5.6 per cent.
The effective incidence of service tax on food bill in air conditioned restaurants will go up to 5.6 per cent as against 4.94 per cent previously, a senior finance ministry official said, reported PTI.
The increased incidence follows government raising service tax rate from 12.36 per cent to 14 per cent with effect from June 1.
Air conditioned hotels and restaurants attract a service tax on 40 per cent of the billed amount. At old service tax rate, the effective rate of taxation came to 4.94 per cent of the food bill and at the higher rate of 14 per cent it comes to 5.6 per cent.
"14 per cent service tax on food and beverage in air conditioned hotels and restaurants calculated on 40 per cent of bill amount. Effective tax rate 5.6 per cent," tweeted Shaktikanta Das, Revenue Secretary.
However, the bills in non-air conditioned hotels and restaurants are exempted from service tax.
Finance Minister Arun Jaitley in his Budget had proposed to raise service tax from 12.36 per cent (including education cess) to 14 per cent. The proposal took effect from June 1.