On Friday, the GST Council lowered the tax rate for restaurants (barring those located in luxury hotels) to 5%. This new rate will be applicable to all AC and non-AC eating outlets from today. Previously, 12 percent GST on food bill was levied in non-AC restaurants and 18 percent in air-conditioned ones. All these restaurants were given input tax credit, a facility to set off tax paid on inputs with final tax. However, Union Finance Minister Arun Jaitley during his press conference had said that the Input Tax Credit (ITC) benefit given to restaurants was meant to be passed on to the customers. Since the restaurants failed to do so, this facility was withdrawn and a uniform 5 percent tax is levied on all restaurants without the distinction of AC or non-AC.
This is expected to bring down the price of your food bill significantly. However, restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 percent GST but ITC is allowed for them. Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 percent GST but will not get ITC. “This revision in GST rate for restaurants is positive, as it would bring down the dining-out cost, supporting footfalls and revenues at a time when most organised restaurants are struggling to grow demand,” ICRA Vice President and Sector Head Pavethra Ponniah told Firstpost about the development.
There are other media reports suggesting that the restaurants might consider an overhaul in their menu, increasing the prices of certain dishes in order to make a profit. Apart from this, Chewing gum, chocolates, coffee, custard powder, marble and granite, dental hygiene products, polishes and creams, sanitary ware, leather clothing, artificial fur, wigs, cookers, stoves, after-shave, deodorant, detergent and washing power, razors and blades, cutlery, storage water heater, batteries, goggles, wrist watches and mattress are among the products on which tax rate has been cut from 28 percent to 18 percent.