The Delhi High Court on Wednesday sought responses from Central and Delhi Governments on a plea alleging that restaurants in the capital were charging excess value added tax (VAT) on the food and drinks served by them.
Under the rules, VAT is to be levied only on the goods component which is 60 per cent of the bill amount and it cannot be imposed on the remaining 40 per cent service component, said the plea, alleging that the restaurants were charging VAT on the entire bill, including the service component, which is a violation of the law.
The plea sought the court’s direction to authority concerned to declare that VAT could be collected only in relation to goods component of an invoice and cannot be collected in relation to the service component.
It further sought a direction to the Delhi Government and Commissioner of VAT to take appropriate action against the restaurants which charged VAT on the service components.
The Delhi Government is a direct beneficiary from this illegal collection of taxes, the petition added.