5% GST at restaurants from today: Why your food bill may still not change
AC restaurants and non-AC
restaurants will charge 5% GST, down from 18% and 12% respectively
LATEST
NEWS : Eating out at restaurants will get cheaper
as GST
council, which lowered the tax rate to a uniform five per cent from 12
per cent on non-AC restaurants and 18 per cent on air-conditioned ones comes
into effect from Wednesday.
Currently, air-conditioned restaurants levy a charge of 18
per cent on food bill and non-AC restaurants levy 12 per cent tax.
The council said the restaurants did not pass on the input
tax credit (ITC) to customers and so the ITC facility is being withdrawn and a
uniform five per cent tax is levied on all restaurants without the distinction
of AC or non-AC.
Restaurants in starred-hotels that charge Rs 7,500 or more
per day room tariff will be levied 18 per cent GST but ITC is allowed for them.
Those restaurants in hotels charging less than Rs 7,500 room
tariff will charge five per cent GST but will not get ITC.
As the new rate comes into effect today, here’s how it will
impact you:
The downside
Menu prices: According to a report by Scroll, restaurant
owners have been mulling a price rise on their menu. This is because of the
high rent they have to pay at expensive locations, loss of input tax credit and
competition from big eateries. Several restaurant owners are not convinced that
a lower tax will make up for the loss of input tax.
Input tax credit: Many restaurant owners have indicated that
the move may drive prices up, courtesy withdrawall of input tax credit. Under
input tax credit, businesses can claim an offset on the tax paid on inputs
against the tax paid to the government. But, now the Council has done away with
the tax credit on food items used as raw material.
According to Federation of Hotels and Restaurants
Association of India President Garish Oberoi the input tax credit accounts for
three to four per cent of a restaurant’s profit, the report added.
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