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5% GST at restaurants from today: Why your food bill may still not change

AC restaurants and non-AC restaurants will charge 5% GST, down from 18% and 12% respectively

BS Web Team  |  New Delhi 

Illustration: Ajaya Mohanty

Eating out at restaurants may get cheaper as GST Council's decision to lower the tax rate to a uniform five per cent from 12 per cent on non-AC restaurants and 18 per cent on air-conditioned ones comes into effect on Wednesday.

Currently, air-conditioned restaurants levy a charge of 18 per cent on food bill and non-AC restaurants levy 12 per cent tax.

The council said the restaurants did not pass on the input tax credit (ITC) to customers and so the ITC facility is being withdrawn and a uniform five per cent tax is levied on all restaurants without the distinction of AC or non-AC.

Restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 per cent GST but ITC is allowed for them.

Those restaurants in hotels charging less than Rs 7,500 room tariff will charge five per cent GST but will not get ITC.

As the new rate comes into effect today, here’s how it will impact you:

The downside

Menu prices: According to a report by Scroll, restaurant owners have been mulling a price rise on their menu. This is because of the high rent they have to pay at expensive locations, loss of input tax credit and competition from big Several restaurant owners are not convinced that a lower tax will make up for the loss of input tax.

Input tax credit: Many restaurant owners have indicated that the move may drive prices up, courtesy withdrawall of input tax credit. Under input tax credit, businesses can claim an offset on the tax paid on inputs against the tax paid to the government. But, now the Council has done away with the tax credit on food items used as raw material.

According to Federation of Hotels and Restaurants Association of India President Garish Oberoi the input tax credit accounts for three to four per cent of a restaurant’s profit, the report added.

The upside

  • You won’t need to burn a hole in your pocket in order to dine at fancy AC restaurants. From 18 per cent tax to five per cent, you will be saving 13 percentage points tax on your food bill.

  • Similarly, at non-AC restaurants, you will be saving 7 percentage points tax on your bill as the same has been slashed from 12 per cent to five per cent.

  • Want to just chill and order food at home instead? No worries as delivery apps such as Zomato and Swiggy will be delivering food from restaurants that will charge you the revised tax rates i.e five per cent. 

Here is the complete list of items which have been shifted from 28% to 18% tax bracket:

First Published: Wed, November 15 2017. 10:53 IST