Restaurants, hotels and eateries should cut rates on food items in their menu to reflect the benefit of being able to set off tax paid on inputs under Goods and Services Tax (GST), Revenue Secretary Hasmukh Adhia said.
He also said that GST will be levied on total food bill, including service charge, in a restaurant, while the value of alcohol or alcohol products consumed in a restaurant will attract value-added tax (VAT).
“Most of the restaurants should revise downward the rate charged on food items in their menu because of input tax credit which is now available. So input tax credit should be accounted for now in form of reduction in the value of supplies which they are giving,” Adhia said during a session of GST Master Class.
Under the Goods and Services Tax regime, while non-airconditioned restaurants attract 12 per cent tax, AC restaurants and those serving liquor attract a tax rate of 18 per cent. In the previous indirect tax regime, service tax was levied on the restaurant bill, but the restaurant operators could not avail input tax credit for taxes paid on inputs.
Adhia further said that anything that is served as part of restaurant bill will be subject to Goods and Services Tax, barring alcohol on which value-added tax will be levied. “On the entire value of food bill, including service charge, on that portion also Goods and Services Tax will apply,” he said. Regarding representations made for a concession for car leases prior to Goods and Services Tax rollout from July 1, Adhia said that the tax department has received representation for transition provision of lease service industry. As per the Goods and Services Tax provisions, input tax credit (ITC) will not be available for central excise already paid on cars which are on lease.
“There are a lot of representations on this about transition for lease service industry. We are looking at the representation but we are not sure how to handle this,” Adhia said.