Decoding our restaurant bills


Did you ever wonder how those initial cheap and economic offers at the KFC’s, the McD’s and the Ohri’s and The Chutneys become suddenly expensive towards the end?

Did you imagine how much are you paying to the government as a tax or how much you can save if you prefer dining at your home through takeaways and home deliveries.?

Did you observe any VAT or service charge when you order through Foodpanda or Swiggy?

Well, its time to get enlightened and stop getting cheated by the corporates.

We’ll discuss how the restaurants charge us or how the seemingly small bill on the menu cards sum up to ridiculously big bills when you initiate paying.

When you go to a restaurant and order any food, let the food costs you Rs 100. Now this is the cost mentioned on the menu card. After you eat your ordered dish you find that the amount that you need to pay is way more than 100. What happened?

Well every purchase contains 3 factors.

  1. Service charge
  2. Service tax
  3. VAT

Lets discuss what’s the difference between these and how much these 3 add to your final bill.

Service charge:  This is the amount levied by the restaurant which can vary from 5-10%. This amount is collected purely as an alternative to tip that is to be shared among the staff. The restaurant shouldn’t take a paisa into its profits from this service charge. So basically service charge is the amount charged by the restaurant waiters or bearers for serving you. Mind you, since you are paying the service charge, you needn’t pay any extra tip to the waiter again.

Service tax: Service tax is the tax levied by the central government. This is calculated as 15% of 40% of bill amount. That essentially equates to 6% of the total bill. This 15% includes the recently added Swachh Bharat cess and Krishi Kalyan cess of 0.5 % each.

Since this is a tax levied by the Central government, no amount is credited to the state government in which the restaurant is located.

VAT: VAT means Value added tax. This is the tax levied by the state governments on the customers. This can range from 5-25 % on the cost of the food.

This tax is different for food and alcohols. If you find 2 VAT’s in your bill then that definitely indicates that you’ve ordered alocohol along with food.

So at the end of the day or at the end of your meal you are making the governments richer after making your tummies fuller. You are being charged a minimum of 6+5+5 = 16% on your food cost to a maximum of 6+10+25 = 41% on your food cost.

There are some positive points in the above discussion.

The 15% Service tax has to be levied only on 40% of your bill. If you find any restaurant charging 15% on your total bill you can report it to the proper department to investigate.

You needn’t pay service charge and tip. Either one is normally done but not both.

When you order through food delivery apps, you shouldn’t be charged with service charge since service charge is what you need to pay towards the restaurant waiter for serving you and in the case of home delivery you are your own waiter.

Also VAT shouldnt be levied on packaged food or bottle water. So next time you find VAT being levied illegally on these two categories you can report it.

The above discussion can be summarized beautifully in the below picture ( Copyrights with the original owner, i dont own any art of this image).Untitled