How GST impacts your restaurant bill

So how does GST impact your restaurant outing? What does it mean for the restaurants business? Will you have to take a bigger hit on your pocket? Here is what GST will mean for restaurants and food outings.

By: Express Web Desk | New Delhi | Published:July 5, 2017 6:35 pm
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If you have visited any restaurant or cafe, post GST rollout on July 1, your bill would’ve looked different than what it would have looked earlier. So how does GST impact your restaurant outing? What does it mean for the restaurants business? Will you have to take a bigger hit on your pocket? Here is what GST will mean for restaurants and food outings:

The GST regime subsumes 17 indirect taxes and 22 cesses and implements a singular and simpler tax regime. According to industry research, the size of the Indian food industry is expected to grow by at least 10 percent each year for the next five years.

What does it mean for the common man?

Before GST was brought in, there were a number of taxes in your restaurant bill. Service Tax, VAT, Krishi Kalyan Cess and Swachh Bharat Cess were levied. A total tax of around 20.5% on you restaurant outing was applicable under the VAT regime. Restaurants used to levy 10% service charge. That could be ignored since it’s not a tax levied by the government. But, the restaurant owners would include the service charge in the bill and apply service tax on that service charge too. Since the levy of service charge is not banned and is made voluntary for customers, it can still be included in the bill. Therefore, in the new regime, the customers will pay a single tax on the total food bill and additional service charge if they wish to.

GST regime divides restaurants into two categories–air conditioned and non-air conditioned. In addition to that, there are sub-categories for establishments that are part AC, those that serve alcohol or don’t serve alcohol and five-star restaurants.

GST rates and how they apply:

Non-air conditioned establishments: The establishments that don’t serve alcohol will charge GST at 12% (Central GST at 6% and State GST at 6%) while the ones that do serve alcohol will charge 18% GST (9% CGST and 9% SGST).

Air conditioned, partly air-conditioned, five-star: These establishments will charge GST at 18% (9% CGST and 9% SGST) regardless of the alcohol availability for patrons. So this brings the tax on restaurant outings down from 20.5% to 18%.

GST is also beneficial for grocery shop owners

After GST, items like wheat, spices, oils etc are still taxed at 5% like the VAT regime. In the case of output tax liability, if you are a business owner, you have the opportunity to increase your working capital.

Here is how:

Pre-GST, on a bill of Rs 5,000, 14.5% VAT and 6% service tax levy meant a total output tax liability of Rs 1,025. Input tax credit (ITC) on VAT calculates to Rs 75 and no ITC on service tax. Hence the final output tax liability after ITC deduction comes out to be Rs 950.

Post GST, on the same bill of Rs 5,000, GST of 18% puts an output tax liability of Rs 900. However, ITC on GST, also calculated to Rs 75, brings the total output tax liability to Rs 875.

Hence, we can say that the new tax seems to benefit both the consumer and the business owner.

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  1. B
    Jul 19, 2017 at 6:44 pm
    one hotel can we have ac billing 18 and non ac billing 12
  2. A
    Jul 12, 2017 at 9:24 pm
    Ar n in kolkata pre gst charged rs 190 for biryani but post gst they are charging 18 extra on the same amount. The reduction is only for fooling people by our honourable p.m,f.m,finance secretary.
  3. B
    Jul 11, 2017 at 7:50 pm
    IIn a restaurant, the bill which was Rs.150 all inclusive in the menu card prior GST , was charged RS.177 post GST with 18 . There is a big loot on the customer in the name of GST.
  4. A
    Jul 11, 2017 at 7:12 pm
    Just ordered from Nirulas Vasant Kunj outlet, The price if the deluxe Thali VEG has gone up instead of the Reduced 18 per cent from 20.5 per cent., the article talks about. They are also levying a conveyance charge of 10 per cent of base amount and levying GST on tht amount as well. How will these discrepancies be corrected as most consumers face this and will be unable to fathom the law. Maybe media coverage should also explain why incidence of GST shd further come down due to increased availability of input tax credit. Also wht does restaurant under composition scheme mean and imply? Who will look into these discrepancies and offer much needed clarity befire traders exploit ignorance.
  5. P
    Jul 6, 2017 at 8:21 am
    All restaurants are charging Gst on vat inclusive rates and fooling people
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