The 13% drop in Goods and Services Tax (GST) on food items at restaurants was greeted with glee and gluttony as diners posted the bills on social media instead of the dishes that they ate.
“We are passing on the benefits from Wednesday itself. We are very happy with the development as low bills are likely to translate into more footfalls,” said S. Venkat Reddy of Telangnana State Hotels’ Association.
The GST on restaurants with air conditioning has been reduced from 18% to 5%, while non-AC restaurants, which were taxed at 12%, now have to pay only 5%. A quick survey with foodies in the city showed a huge difference in the bills that the cut in GST has made. If a bill of ₹1,240 attracted ₹223 GST, the amount paid as GST on the same bill is ₹62 now. “Two days ago, you had to pay ₹195 for this tuna sub. But now you will have to pay ₹189 for the same,” said an employee at Subway, an American quick service restaurant. However, the prices have not budged at another American QSR: McDonald’s. “Our prices shown on screen are tax-inclusive. So there is no change in the price,” said a teller at McDonald’s in Hyderabad Central Mall.
“We are passing on the benefit of lower taxes to customers. There was a steep drop in patronage since the tax rates went up. It has affected many of our hotels and restaurants. But with this rationalisation, hopefully, we will return to regular business,” said Mr. Reddy.
Input tax credit
But it’s not all hunky dory with restaurant owners. “From the consumer point of view, it’s a good move. But smaller restaurants like us will be affected as our bottom line will take a hit due to input tax credit (ITC). Earlier, we could claim ITC on rent, purchases and other inputs. But now, we will have to absorb the cost. That will be a big burden. A back-of-the-envelope calculation that I made revealed that per year I stand to lose ₹18 lakh due to ITC,” said Nagaraju Ravi Raju, a restaurant owner at Jubilee Hills.
Filing returns
This is not all. “The paperwork that we have to do every 10 days takes up a lot of time. The government has done a people-friendly move by reducing the GST on restaurants. They should also consider reducing the documentation required for filing the returns,” said another restaurant owner.