Ser­vice charge col­lected by ho­tels is not ser­vice tax: Fi­nance min­istry

Consumer Voice - - In The News -

The gov­ern­ment to­day clar­i­fied that ser­vice charge col­lected by cer­tain restau­rants and ho­tels is not ser­vice tax, which is levied at a rate of 5.6 per cent on the to­tal bill.

As per the state­ment from the fi­nance min­istry, “These 'ser­vice charges' col­lected by the restau­rants/ ho­tels/eater­ies are re­tained by the restau­rants/ho­tels/eater­ies and are not 'ser­vice tax' im­posed by the gov­ern­ment.” Some con­sumers think that these ser­vice charges are be­ing col­lected by the res­tau­rant on be­half of the gov­ern­ment as tax, the min­istry’s state­ment em­pha­sized.

In case of air-con­di­tioned eater­ies and ho­tels, ser­vice tax at the rate of 14 per cent is charged only on 40 per cent of the bill amount. The ef­fec­tive ser­vice tax rate in re­spect of ser­vices pro­vided in re­la­tion to serv­ing of food or bev­er­age by a res­tau­rant, eat­ing joint or mess hav­ing the fa­cil­ity of air con­di­tion­ing or cen­tral air-heat­ing in any part of the es­tab­lish­ment is 5.6 per cent of the to­tal amount charged.

The gov­ern­ment had in­creased the ser­vice tax rate from 12.36 per cent (in­clud­ing ed­u­ca­tion cess) to 14 per cent from June 1.

No fine till 3 days af­ter credit card bill’s due date

The Re­serve Bank of In­dia (RBI) has asked banks to levy any late-pay­ment penalty on credit-card cus­tomers only if the pay­ment has been due for more than three days. As per the same di­rec­tive, banks should also re­port de­layed pay­ment to credit-in­for­ma­tion com­pa­nies (CICs) only when a credit-card ac­count re­mains ‘past due’ for more than three days.

The di­rec­tive will ben­e­fit those whose pay­ment or trans­fer gets de­layed due to a bank hol­i­day or for any other rea­son. At present all banks state that late-pay­ment charges are ap­plied if pay­ment is not made by due date. These charges vary from Rs 100 to Rs 700 depend­ing on the to­tal pay­ment due.

Although ear­lier RBI had is­sued a di­rec­tive stat­ing that the next state­ment date should be the ref­er­ence date for com­put­ing penal­ties and re­port­ing de­faults to credit bu­reaus, banks have con­tin­ued to use the due date for im­pos­ing late fee.

In a cir­cu­lar is­sued to all banks, RBI said that in or­der to bring in greater credit dis­ci­pline as also to pro­vide op­er­a­tional flex­i­bil­ity to credit-card is­suers, ‘past due’ sta­tus of a credit-card ac­count for clas­si­fy­ing bad loans would be reck­oned from the pay­ment due date men­tioned in the monthly cred­it­card state­ment. “Con­se­quently, in case of banks, a credit-card ac­count will be treated as non-per­form­ing as­set if the min­i­mum amount due, as men­tioned in the state­ment, is not paid fully within 90 days from the pay­ment due date men­tioned in the state­ment,” RBI said.

The RBI fur­ther asked banks to re­port a credit-card ac­count as ‘past due’ to credit in­for­ma­tion com­pa­nies or levy pe­nal charges, such as late-pay­ment charges, only when a credit-card ac­count re­mained ‘past due’ for more than three days. The num­ber of ‘days past due’ and late-pay­ment charges should be, how­ever, com­puted from pay­ment due date men­tioned in the credit-card state­ment, it added.

In credit-card ac­counts, the amount spent is billed to the card users through a monthly state­ment with a def­i­nite due date for re­pay­ment. Banks give an op­tion to card users to pay ei­ther the full amount or a frac­tion of it or a min­i­mum amount on the due date and roll over the bal­ance to the sub­se­quent month’s billing cy­cle.

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