From today eating in restaurants and hotels become cheaper with the Goods and Services Tax Council having slashed rates to five percent from 12 and 18 percent earlier. However, there is no formal notification from the government as yet.
For all the restaurants council prescribed a 5% tax both for air- conditioned and non-AC. Union Finance Minister Arun Jaitley said that the Input Tax Credit (ITC) benefit given to restaurants was meant to be passed on to the customers.
12 percent GST on food bill is levied in non-AC restaurants and 18 percent in air-conditioned ones.
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.
Arun jaitley said that the tax has reduced on wet grinders and ironclad vehicles was cut from 28% to 12% and on another six items was reduced from 18% to 5%, on eight items reduced from 12% to 5% and on six items from 5% to nil.
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.
ICRA Vice President and Sector Head Pavethra Ponniah said that 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.
“As most major inputs for restaurants like grains (not packaged), vegetables, poultry and seafood are exempt from GST, the input credit advantage available for restaurants was negligible,” Ponniah said, adding that restaurants were also not passing on any benefit of input tax credit to the consumer under GST.