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Eating out in AC restaurants may soon get cheaper, GST could be cut to 12%

GST panel mulls paring rate on such eateries to 12% from 18%, bring them at par with non-AC ones; Five-star and above to continue to attract 18%

BS Web Team  |  New Delhi 

An employee sets a table inside a restaurant at the Crown Plaza hotel, run by the InterContinental Hotels Group (IHG). Photo: Reuters
An employee sets a table inside a restaurant at the Crown Plaza hotel, run by the InterContinental Hotels Group (IHG). Photo: Reuters

A panel is considering reducing the rate on air-.conditioned (AC) to 12 per cent from 18 per cent which will bring them at par with non-AC The council may also withdraw input tax credit facility available to eateries. However, the rate on AC located in five star and above rated hotels will remain 18 per cent.

According to a Times of India report,  the proposed change in the tax rate follows complaints that were pocketing the benefit of input tax credit for taxes paid by suppliers and the tax burden on those eating out was high. The withdrawal of input tax credit will make it a flat tax structure, with many suggesting that it will end on in its purest form.

The panel, set up by the Council on Sunday, claimed that there is a case for doing away with the distinction between  AC and non-AC “There is a consensus that there is no need for a distinction between AC and non-AC It can only create confusion,” a source told The Mint

On October 29, the panel will again hold a meeting to discuss the issues before placing it before Council. The final decision will be taken by Finance Minister Arun Jaitley in November 9 Council meeting in Guwahati. 

Besides, the panel will also decide whether AC should be taxed at 12 per cent with or without the benefit of tax rebates, The Mint report said. 

Read more: Hotels, restaurants may have to pay tax on service charges

At present, AC get rebates for the taxes they pay on various items used in the course of their business. However, there have been complaints that many did not pass on the benefit of this rebate to consumers. 

The panel includes Assam Finance Minister Himanta Biswa Sarma, Jammu and Kashmir Finance Minister Haseeb Drabu, Bihar Deputy Chief Minister Sushil Kumar Modi, Chhattisgarh Commercial Taxes Minister Amar Agrawal, and Punjab Finance Minister Manpreet Singh Badal.

Eating out is an expensive affair

  now expected
AC restaurants  18% 12%
AC in 5-stars and above-rated hotels 18% 18%
Non-AC restaurants 12%  12%


First Published: Wed, October 18 2017. 08:55 IST