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





Anatomy of petrol prices


A wall street analyst once said, ” Petrol prices and gold prices are like the stock markets, No matter what they are bound to increase”. But if you observe the present trend of crude oil prices you might think that analyst didn’t do his home work well.

Well, the fact is he is right. The prices are bound to increase. What we are seeing is only a short term relief. Barrel crude oil cost $110 1.5 years back. Now it plummeted to $40.

There are various reasons for it. But the real  question is whether we, the people of India are reaping the benefits of low crude oil prices? Answer is a sad NO.

let’s see what’s preventing us from reaping those benefits. But before that let’s discuss the causes of low crude oil  prices.

  1. United States’s production of shale gas efficiently at low costs: Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that can be rich resources of petroleum and natural gas. Sedimentary rocks are rocks formed by the accumulation of sediments at the Earth’s surface and within bodies of water.
  2. This shale gas production was not cost effective until now. But then, scientists developed methods to extract shale gas at low cost. Thus, US is producing its own gas without depending much on OPEC countries. This lead to a gap in demand and supply.
  3. All the gas utilised by US is now sitting at the production houses. OPEC countries didn’t decrease their crude oil production rate as they value their market share in the oil production.
  4. So we have more crude oil and less demand, which essentially decreased the prices of crude oil.
  5. Another reason why OPEC countries doesnt want to decrease their production is because of pressure from US. Its starch rival Russia is one of the biggest exporter of crude oil and so lower crude oil prices will destabilize Russia’s economy and eventually weaken it.
  6. Because of lower crude oil prices, Russia slid into a negative GDP growth rate and is currently one of the worst inflated countries joining the sides of Brazil etc.

All these events lead to fall of barrel crude oil price from $110 to $ 30, which is a 266% decrease in crude oil prices. So naturally one question comes in the mind of common mind. “Why are the petrol prices not reduced???”

The answer is”TAX” and “RUPEE DEPRECATION”

Yes. Even though we are getting crude oil at lower costs, Indian government started increasing taxes on petrol in the form of VAT. So essentially whatever reduction in price was there, it was all balanced by the increase in tax on crude oil. Let us deconstruct the tax on petrol before it reaches to us. Also, the value of Indian rupee decreased continuously. So we have to shed more rupees in order to buy the same petro dollar.


Also, let’s observe the different stages where tax is levied and what we get finally.img.png

Above picture shows clearly how much tax we are paying for a litre of petrol.

In a tax-free hypothetical world, we should get the petrol for as little as 20 rupees. But in todays world we are shedding 60 rupees. That means 40 rupees is being collected as tax.


This is the reason why even though the oil prices drop, we still continue to pay high for petrol and diesel.


Let us first understand the meaning of repo rate and reverse repo rate and then we’ll go deep into what it means to the common man

  1. Repo rate is the rate at which RBI lends money to commercial banks in the event of any shortfall of funds. It is the key instrument of monetary policy to control inflation
  2. Reverse Repo is the rate at which banks purchase government securities from RBI to lend it money and earn interest.
  3. MSF is an emergency borrowing (during cash shortage) by banks from RBI
  4. During inflation, RBI tends to increase repo rate. This will discourage banks to take  money from RBI which in turn creates low cash reserves with the banks.
  5. So people will be discouraged to take loans from banks as banks now lend them at a high-interest rate citing the high repo rate.
  6. So the purchasing capacity of the consumer decreases thereby decreasing the demand in the market which in turn decreases the inflation in the market ( Afterall inflation is because of high demand and low availability)
  7. Now when repo rates are cut which means the interest rate at which RBI lends money to banks are decreased, banks readily take money from RBI and they give loans to consumers at lesser interest rates. This will, in turn, encourage consumers to take loans readily and thereby purchase goods from  the market. Thus the spending capacity of the consumer increases, growth of the companies increases which leads to the growth of the whole nation.
  8. Coming to present situation, RBI has reduced the repo rates to 6.5%, a 0.25% cut against the expected 0.5% and reverse repo rate has been hiked by 0.5% to 6%
  9. While the CRR has been kept unchanged at 4%, MSF has been trimmed by 0.75% to 7%
  10. RBI expects the economy to grow by 7.6% in the FY2016-17 and has kept the inflation target at 5% for FY2016-17

Panama Papers


For those of you who are wondering what Panama papers is, I will try to explain in as simple words as possible.

  1. Panama Papers are documents obtained from a Panama-based offshore services provider called Mossack Fonseca. The documents were received by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ) with the Organized Crime and Corruption Reporting Project (OCCRP).
  2. The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars
  3. The leaked records — which were reviewed by a team of more than 370 journalists from 76 countries — come from a little-known but powerful law firm based in Panama, Mossack Fonseca, that has branches in Hong Kong, Miami, Zurich and more than 35 other places around the globe.
  4. The leaked data covers nearly 40 years, from 1977 through the end of 2015
  5. The data includes emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, from Nevada to Singapore to the British Virgin Islands.
  6. These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.
  7. The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan
  8. Most of the services the offshore industry provides are legal if used by the law abiding. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption. In some instances, the files show, offshore middlemen have protected themselves and their clients by concealing suspect transactions or manipulating official records.
  9. The world’s best soccer player, Lionel Messi, is also found in the documents. The records show Messi and his father were owners of a Panama company: Mega Star Enterprises Inc. This adds a new name to the list of shell companies known to be linked to Messi. His offshore dealings are currently the target of a tax evasion case in Spain.
  10. Almost 500 Indians are owners of the shell companies purchased through Mossack Fonseca which include the famous Amitabh Bhachan and his daughter in law Aishwarya Rai Bachan who changed her ownership name to A Rai citing confidentiality reasons in her offshore company’s share owners list.

the above video clearly explains why it is illegal to have offshore companies.