It has been clarified by the honorable finance minister that restaurants without Air Conditioning facility will not charge any service tax from their customers. Restaurants, eating joints or messes, which do not have facility of Air Conditioning or central heating in any part of their establishment are exempt from service tax.

While the restaurants with facility of Air Conditioning will have to charge service tax from their customers only on 40% of the total bill amount.  In other words, restaurants with Air Conditioning facility will only be liable for service tax.

With rate of service tax 14%, the effective rate of service tax on such restaurants, eating joints or messes will be 5.6%, being only 40% of total bill amount is taxable.