Narendra Modi has again proved that he will always favour public with his government agreeing to decrease the GST rate for restaurants. As we all know, there was protests by hoteliers over increase in food items, due to GST. Taking note of all this, Narendra Modi led government has decided to decrease GST rate, which has made both public and hotel owners happy.
The next time you go to restaurants you will have to pay uniform GST rate of 5 per cent, instead of 12 per cent or 18 per cent earlier depending on AC or non-AC restaurants. This was decided at the 23rd meeting of the GST Council meet today in Guwahati.
But restaurants won’t get the benefit of input tax credit, a facility to set off tax paid on inputs with final tax. Currently, GST is levied at 12 per cent on food at non-AC restaurants, while it is 18 per cent for air-conditioned ones with input tax credit benefit for restaurants.
Finance Minister Arun Jaitley addressing a press conference said that the Council was of the view that most restaurants did not pass on the benefits of input tax credit to customers by reducing prices after GST was implemented from July 1.
5 percent rate on restaurants (except those in star hotels) without any input credit might not be the best decision from a tax policy standpoint and breaks the chain (of input tax benefits), which is not desirable. From a consumer standpoint, however, it should lead to some decrease in prices particularly in case of small restaurants. This decision seems to be based on government’s belief that the industry has not passed on the input credit benefit to customers.”
Jaitley also said restaurants within five-star hotels (room rent above Rs. 7,500) will attract 18 per cent GST with input tax credit benefits. Outdoor catering will attract 18 per cent GST with input tax credit benefits.
Amid a slowdown in economy and protests by traders, particularly in poll-bound Gujarat, Goods and Services Tax Council has decided to overhaul the indirect tax regime, reducing 28% tax on 178 items to 18% or less.
This move by government has met with good response. Shahid, who owns outlet of popular food chain in a mall in Bengaluru said, “This is a much needed move. Our profits had decreased due to GST. However after lots of persuasion, the government has finally agreed. We had to increase our price of food items, due to which people started to come less to our outlet. But after November 15, when this new rate of GST is implemented, I can explain better business.”
Ajay, a foodie said, “It is a great move. At the end of day, anything which is good for the common people is welcome. This new rate is even better than before, when service tax on restaurants was nearly 10 percent. I hope that restaurants lower the price or else there will be no use of lowering GST.”