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Icra hails 5% GST rate on AC, non-AC restaurants

Last week, the GST council lowered the tax rate of restaurants to a uniform 5% from 12% on non-AC restaurants and 18% on air-conditioned ones

Press Trust of India  |  New Delhi 

Representative image
Representative image

Rating agency ICRA on Monday welcomed the decision to levy 5 per cent on all restaurants, both air-conditioned and non-AC, saying the revision in rates is positive and will bring down the dining-out cost.

Last week, the council lowered the tax rate of restaurants to a uniform 5 per cent from 12 per cent on non-AC restaurants and 18 per cent on air-conditioned ones.

"This revision in 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," Icra Vice President and Sector Head said.

Currently, 12 per cent on food bill is levied in non-AC restaurants and 18 per cent in air-conditioned ones. All these got input tax credit, a facility to set off tax paid on inputs with final tax.

The council said the restaurants, however, did not pass on the (ITC) to customers and so the ITC facility is being withdrawn and a uniform 5 per cent tax is levied on all restaurants without the distinction of AC or non-AC.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 but ITC is allowed for them.

Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 per cent but will not get ITC.

"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 to the consumers under

First Published: Mon, November 13 2017. 20:50 IST