GST Rates slashed: Does eating out gets cheaper or will the menu price increase?
With the Goods and Services Tax (GST) cut down to 18 percent for over 200 items, the decision that has foodies in Delhi elated is the reduced rates for AC restaurants, which could make eating out cheaper. The initial 18% tax rates for air-conditioned restaurants and 12% for non air-conditioned restaurants were slashed to 5% GST on all food items from November 15. Value Added Tax (VAT) will continue to be charged for alcohol, which does not fall under GST But with no input tax credit, several experts said restaurateurs might end up increasing menu prices. “It had just gotten very expensive. Even places you would think would be affordable ended up being costly. And menus don’t have tax inclusive rates printed. So if you go to a restaurant expecting that the bill would be around Rs 500 per person, at the end with the service charges and taxes it would come to be around Rs 700 per person,” said Tanushree Sarkar, a consultant in Delhi. The Delhi Hotel and Restaurant Owner’s Association president, Sandeep Khandelwal, welcomed the lower tax rates and said this would incentivise people to pay taxes. “People will not try to cheat on taxes now. It is so low, that it might be cheaper to pay it, than trying to bribe your way out of it,” he said. However, since restaurants will not get back input tax credit (ITC), which makes taxes already paid on raw material deductible from the final tax amount, some experts said menu prices could be hiked by at least 10%. “Denying the ITC benefit goes against the very grain of GST. It will push up the costs by 10%, which will be passed on the menu price. So, effectively, the consumer will get a marginal benefit,” said Rahul Singh, the founder and CEO of the Beer Cafe. -PTC News
