We at NFN Labs eat out at restaurants a lot almost everyday. We had been seeing a lot of people on our Facebook/Twitter feeds talking about the right way to calculate Service Tax, when does service charge come into the picture and what is the percentage of Value Added Tax (VAT) to be applied. It was about ‘how restaurants (wrongly) calculate the total bill amount’
There are three components in a bill which need to be verified. Service Charge, VAT, Service Tax.
Service charge is a percentage added to the bill amount which ranges anywhere from 2% to 15% based on the type/class of the restaurant you decide to eat in.
VAT is a tax on the final consumption of goods or services that is ultimately borne by the consumer and varies for each state in India
Service Tax is calculated as 12.36% on 40% of [bill amount+service charge] (yeah!) or some restaurants write it as 4.94% of the bill amount+service charge and it is only applicable on AC restaurants. There have been cases where restaurants charge 12.36% on the total bill amount.
So we thought why not turn this problem into a simple app where all you have to do is enter your bill amount (subtotal) and the app lets you know if there is any discrepancy in the final total after the taxes are levied.