Last week, the GST Council announced slashing tax rate on all restaurants to 5%, without input tax credit (ITC), which analyst say would make the eateries hike price in future. But it has already begun. Jubilant FoodWorks Limited, which holds the master franchise for Domino’s Pizza and Dunkin’ Donuts in India, has hiked prices across the menu on its pizza products, ET Now reported. The price of medium-sized pizza has been hiked by 6%. However, Dunkin’ Donuts prices remain unchanged for now, the company said.
The GST rate was slashed from 18% on all AC restaurants and 12% on all non-AC restaurants to 5%, but with the withdrawal of input tax credit. This means that restaurants cannot claim the refund on taxes paid by them on inputs or raw materials. This, analysts say, would make restaurants to hike prices across the menu. Meanwhile, restaurants in hotels with rooms of Rs 7,500 or more will continue to attract 18% tax but with ITC.
Rahul Singh, vice-president, National Restaurant Association of India (NRAI), said, “We welcome the reduction in GST slab from a very high 18% in an AC restaurant to 5% 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% which will be passed on the menu price. So, effectively the consumer pocket will get a marginal benefit and not as it seems.”
While credit rating company ICRA has said that it was a positive move and will help bring down the cost. “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.
Besides lowering taxes on restaurants, a massive GST rejig was also done, in which 177 items under the highest tax slab of 28% were brought down to the 18% or lower tax brackets. The GST Council has decided to keep only 50 items, mostly demerit, sin and luxury goods in the 28% bracket. These items include chocolates, chewing gum, shaving cream, aftershave kits, beauty products, granite and marble.
(First published on Wednesday, 15 November 2017 on www.financialexpress.com)