A DAY after the lower GST rates for restaurants — cut from 18 per cent to 5 per cent — took effect, consumers complained restaurants were increasing the base prices of food items. Despite the GST cut, the overall food bills had seen no reduction, they said. Last week, the tax slab for AC and non-AC restaurants was fixed at 5 per cent. However, restaurants that offer rooms for lodging at rates above Rs 7,500 will continue to charge 18 per cent GST.
“By increasing the base price of food items, consumers are ending up paying the same cost as before. This discourages us from eating out. It is also cheating,” said Rohit Raina, a resident of Kandivali.
Consumers have put up food bills online, calling it a “loot” by restaurants. In two food bills attached to a post by a consumer, a coffee item that cost Rs 120 at McDonald’s before November 15 was sold for Rs 135 after implementation of the new GST slab. As a result, there is no change in the overall bill.
“The government has brought down GST from 18 per cent to 5 per cent, but there has been a removal of Input Tax Credit. Due to this, our operating costs have gone up,” an official statement from McDonald’s reads. It adds: “We have substantially reduced the prices of some of our flagship products… We have always been open about our prices.”
“Tata Starbucks complies with all the local laws and regulations. Following the recent revision in the Goods and Services Tax (GST) structure, we have ensured savings for our customers on every product. The rollout of the change in GST structure included the elimination of input tax credit, increasing costs for the industry. As a result, we raised our base prices, still providing savings for our customers after tax,” reads an official statement from Starbucks.
“Pricing is also continually evaluated on a product-by-product basis in our stores to balance business needs while continuing to provide value to our customers,” the statement adds.
Deepu Tiwari, a consumer, meanwhile, said a restaurant he visited had increased the base prices a month ago. “Almost all big food joints have hiked the base prices of food items. Officials at the restaurant in Vidyavihar I visited claimed they had increased the base prices of food items a month back. The government must take strict action against it,” he said.
Senior officials from the Hotel and Restaurant Association of Western India (HRAWI), which represents the interests of hotels in Mumbai, believe the withdrawal of ITC will impact it in a negative way. “Expenditure like capital expenses, franchising, outsourcing and select food items among others will take a beating as GST paid on such services or expenditures will not be available for input credit. This not only discourages expansion or development but also makes it difficult for establishments to pass on any reductions to the customers,” said Dilip Datwani, president, HRAWI.
Other key reconsiderations suggested by the HRAWI include reducing the GST rate on room tariffs of Rs 7,500 and above to 12 per cent and, accordingly, bring the GST rate for restaurants at such hotels at par with all others to 5 per cent, treating foreign exchange earnings in tourism services as either exports or deemed exports.