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ICRA welcomes GST cut on restaurants

15 November 2017

The GST Council, in its 23rd meeting in Guwahati, had slashed the tax rate from 18 per cent to just 5 per cent.

"13 items, which were earlier under 18 percent, have been brought down to 12 percent". Deputy chief minister Sushil Kumar Modi said on Tuesday a screening committee is being set up in every state for people to register complaints regarding profiteering and excessive tax being levied by manufacturers and traders in the name of Goods and Services Tax (GST). "Restaurants were also not passing on any benefit of input tax credit to the consumers under GST". Tax on eight items was lowered from 12% to 5%, while six other items were moved from the 5% slab to nil.

Rahul Singh, vice-president, National Restaurant Association of India (NRAI), said,"We welcome the reduction in GST slab from a very high 18 per cent in an AC restaurant to 5 per cent without any distinction of the air-conditioning...denying the ITC benefit goes against the very grain of GST and will push up the costs by 10 per cent which will be passed on the menu price". However, for hotels that charge Rs 7,500 or more per day as room tariff will be levied 18 per cent GST but are permitted to have Input Tax Credit. GST shaved off 0.5 percent off the bill when it was introduced, say some restauranteurs. Last week, GST council has come over with another twist in GST rates.

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Inspite of a 5 percent GST on restaurants, there is a niggling worry in the minds of consumers though. As the GST reduced to 5 percent, the price of meals in non AC section will be Rs 42. "If a restaurant has a signature dish which attracts clientele, it may hike its price as ITC has been taken away", said Gulati, though he does not foresee it happening soon. As most major inputs for restaurants like grains (not packaged), vegetables, poultry and seafood are exempt from GST, the input credit advantage available for restaurants was negligible.

"Many daily-use FMCG products are set to become cheaper as producers have made a decision to pass on benefits to the consumers", Care Ratings said, according to The New Indian Express.

Those who will be hit hard will be hotels and restaurants which stand on rented property. "Since they did not pass on the ITC benefit to customers, they will not be eligible for the benefit themselves", Jaitley had said. So it is not going to be good news for long for customers, perhaps.

ICRA welcomes GST cut on restaurants