Finally, officials have woken up to the hotels and restaurants in the city fleecing customers in the name of Value Added Tax (VAT). The vigilance and enforcement department randomly inspected six hotels and restaurants in the city a few days ago and found to their surprise that these establishments had collected Rs 2.48 crore as excess VAT from unsuspecting customers during the previous financial year.

As per rules, VAT of 14.5% should be calculated and levied only on the value of food and beverages. However, it was found that these hotels and restaurants were levying VAT on food and beverages, service tax and service charge. While most of the hotels were passing on the excess collections to the commercial taxes department, some of them were pocketing the same, V & E sources said.

"Hotels and restaurants cannot collect VAT on service tax and service charge components. It is an unnecessary burden on the consumers. People should be vigilant and check their bills while paying the amount," Vigilance and Enforcement (V&E) director general RP Thakur told TOI. According to officials, this practice is prevalent in many hotels and restaurants in the city.

While VAT goes to the state government, service tax of 4.95% goes to the Centre. Service charge is a recent practice adopted by the eateries and depending on the category, they are charging anywhere between 5% and 20% on the food and beverages consumed. "We found that VAT was being levied on the final amount that includes food and beverages, sales tax and service charge. In fact, many customers presume all these to be taxes and leave behind a hefty tip beyond the bill. Next time around, check the bill carefully before making the payment," officials said.

The recent random inspections by the vigilance authorities revealed that Taj Krishna in Banjara Hills levied a VAT of Rs 29.32 lakh on the total service charge of Rs 2.02 crore that it collected from customers in 2012-13. Similarly, it levied a VAT of Rs 42.32 lakh on the total sales tax of Rs 2.91 crore that it collected from the customers during the same year. This totally works out to an excess VAT collection of Rs 71.64 lakh from the customers during the year 2-12-13.

Similarly, Hotel Hyatt at Gachibowli collected an excess VAT of Rs 31.56 lakh and that of Hotel Kamal Pvt Ltd alias Hotel Basera, Secunderabad, was Rs 1.21 crore during the previous financial year. The excess VAT collection of the other hotels and restaurants during 2012-13 that were inspected by the vigilance department were as follows: Taj Tristar, Secunderabad (Rs 10 lakh), Hotel Regenta One, Nanakramguda (Rs 12.4 lakh), and that of Atluri Foods or Chutneys, Banjara Hills, (Rs 1.76 lakh).

After conducting the inspection, the V&E department has informed the commercial taxes department about the excess collection of VAT by hotels and restaurants. When contacted, Commercial Taxes commissioner Hiralal Samariya said he was not aware of the excess collection of tax amount by some hotels.