Readers Question why do cafes charge extra service tax when they remain open on public holidays?
Firstly, cafes are likely to have to pay higher wages to staff to compensate for the inconvenience of working on a public holiday. Charging extra service tax is a way of paying for the increased wage costs.
Secondly, on public holidays demand for visiting cafes is likely to be higher. There could even be queues of people, therefore, because demand is price inelastic charging higher prices will not discourage many customers from coming.
It is a form of price discrimination, charging different prices depending on time of year. It is a similar principle to airlines charging higher prices for peak holiday times e.g. over Easter, summer holidays.
It may seem unfair customers have to pay higher prices, but without the ability to charge higher prices on public holidays, firms may decide to remain shut rather than pay higher wages with the same prices.