Eating out and ordering takeaways at restaurants all over the country will become cheaper from today as only 5 per cent tax will be levied. Earlier, it was 18 per cent (if ordered from AC restaurants) and 12 percent (non-ac restaurants).
For example, a customer used to pay 18 per cent GST for a cup of tea say costing Rs. 50, used to bring the total bill to Rs. 59. Now, the same customer, at 5 per cent GST, will pay a total bill of Rs. 52.5.
The Goods and Services Tax (GST) Council last Friday, during its 23rd meeting, decided to reduce the tax rate to 5 per cent from the earlier 12-18 per cent. After the meeting in Guwahati, Union Finance Minister Arun Jaitley had informed that all restaurants in the country will be levied a GST of 5 per cent and no restaurant will have the Input Tax Credit (ITC) benefit. The new tax rate is applicable to all AC and non-AC restaurants, except those in the five-star restaurants, said Jaitley.
The five-star hotel with restaurants will attract 18 per cent tax with ITC benefits. The outdoor catering will also attract 18 per cent GST with ITC benefits. The hotels where the room rent is above Rs 7,500 come under the five-star hotel category.
The decision to slash down the GST came as a major relief to restaurant owners as well as customers who had complained of the previously high tax rates of 18 per cent for restaurants with air-conditioning and 12 per cent for those without.
As many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent during the 23rd GST Council meet.
The decision to abolish ITC and cut tax rate to 5 per cent sparked divergent reactions by high rent paying big restaurants and smaller restaurants. While big restaurants, typically in high rent paying marketplaces, said that this would lead to increase in prices, smaller restaurants welcomed the cut in rates, denying a rise in prices.
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. So, effectively the consumer pocket will get a marginal benefit and not as it seems.”
On the other hand, President of Indian Hotel and Restaurant Association (AHAR), Adarsh Shetty said: “Restaurants have bled for last four months. Business went down by 30 per cent especially for home delivery and parcel services. There was no need for a distinction between AC and non-AC restaurants. Prices cannot go up at all after the reduction in rates. Our first priority now is to get business back on track.”