Many AC restaurants in Mumbai found to be evading service tax

Surveys at 805 air-conditioned restaurants in Mumbai has revealed that about 60 per cent are not even registered with the service tax department, let alone the payment of tax to the government.
"471 restaurants have not got service tax registration," said R Sekar, Service Tax Commissioner, Zone 2. Last month, Zone 1 authorities had surveyed another 150 AC restaurants.
Sekar added that of the 334 remaining hotels, 76 are registered but have not paid the tax. Many restaurants have been charging customers for service tax but not passing it on to the department. "We have issued letters to all of them, asking them to register themselves," Sekar said.

In general the compliance level is very low, he said. The evaders may have to pay tax plus 18 per cent interest or penalty equivalent to the amount evaded.
Additional Commissioner S K Sharma said that the evaders can also be booked under the Finance Act, and if the amount is more than Rs 50 lakh and evaded for over six months, defaulters can get rigorous imprisonment upto seven years. "Such offences are cognisable and non-bailable," added Sharma.
Sekar said two of the restaurants surveyed have admitted service tax liability of about Rs 30 lakh and agreed to pay soon. "One of the restaurants which has been collecting service tax since May 2011 but failed to deposit the amount, admitted tax liability of Rs 23 lakh," added Sekar.

If the customers notice that AC restaurants are not charging the service-tax, they can report it to the department, he said.
"Action will also be taken against those who charge service tax on the entire amount, since as per the law the tax can be charged on the 40 per cent of the bill amount," Sekar further said.
Defaulters can take benefit of voluntary declaration scheme, where they can be exempted from interest and avoid prosecution by paying up the tax voluntarily.