GST News: Eating at Restaurants May Get More Expensive

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Eating out at restaurants & eateries might just get costlier if the government gives a nod to reduce GST rates from the existing 18% to 12% as currently proposed. Indicated by few industry reports, a ministerial group has been put together to look if restaurants are passing on the cost benefits of reduced prices under the GST regime over to customers. The ones that don’t if found doing so, they could be potentially looking at denial of input tax credit claims.

National Restaurant Association of India [NRAI] on this issue states, “Under the current 18% tax rate, restaurants get to claim credits on the taxes they pay on various things like processed food, rent, electricity and transportation. However, if the GST rate is brought down to 12%, then in the absence of input tax credit, they will not able to claim these tax rebates, resulting in an increasing in their operational costs by 7% -10%. In the earlier tax regime, restaurants were allowed an input tax credit on things like food items, cutlery etc.”

Riyaaz Amlani, President of the National Restaurant Association of India says, “Under the earlier tax regime, the tax on processed food was at 5%, but now under GST, this has gone up to 12%. Taxes on many such inputs have gone up, so if we do not get an input tax credit, then our cost of running the restaurants will go up, leading to higher menu prices for customers.”

As per the GST regime that was implemented on July 1st, 2017, the restaurants with air conditioned services pay 18% GST levied on food. Although, they’re hoping the proposed revision doesn’t come into effect but NRAI also praised the GST regime for unifying external entities like vendors & suppliers who otherwise still would have been in unorganized sectors but now have an incentive to file their tax returns.

Image Credits: Splendid Table | Docs Assembly Payments

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