Restaurants to levy 5% GST from today, food bills likely to come down

Eating out at restaurants could get cheaper as GST Council’s decision to lower the tax rate to a uniform 5 percent from 12 percent on non-AC restaurants and 18 percent on air-conditioned ones comes into effect on Wednesday.

Currently, Non-AC restaurants levy 12 percent tax and AC restaurants levy a charge of 18 percent on food bill.

The council aforesaid the restaurants didn’t pass on the input tax credit (ITC) to customers then the ITC facility is being withdrawn and a consistent 5 percent tax is levied on all restaurants without the distinction of non-AC or AC.

Restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 percent GST but ITC is allowed for them.

Those restaurants in hotels charging less than Rs 7,500 room tariff can charge 5 percent GST but won’t get ITC.

The drawback

Menu prices: according to a report by Scroll, restaurant owners are 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. many restaurant owners aren’t convinced that a lower tax can make up for the loss of input tax.

Input tax credit: many eating place owners have indicated that the move may drive prices up, courtesy withdrawal of input tax credit. under input tax credit, businesses will claim an offset on the tax paid on inputs against the tax paid to the govt. But, now the Council has done away with the tax credit on food items used as the staple.

According to Federation of Hotels and Restaurants Association of India President garish Oberoi the input tax credit accounts for three to four percent of a restaurant’s profit, the report added.

The upside

You won’t need to burn a hole in your pocket so as to dine at fancy AC restaurants. From 18 percent tax to 5 percent, you’ll be saving 13 percentage points tax on your food bill.

Similarly, at non-AC restaurants, you’ll be saving 7 percentage points tax on your bill as the same has been slashed from 12 percent to 5 percent.

Content Credit: djmaza

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