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%

A Goods and Services Tax panel is considering reducing the GST rate on air-.conditioned (AC) restaurants to 12 per cent from 18 per cent which will bring them at par with non-AC restaurants. The council may also withdraw input tax credit facility available to eateries. However, the GST rate on AC restaurants 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 restaurants 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 GST on restaurants in its purest form.

The GST panel, set up by the GST Council on Sunday, claimed that there is a case for doing away with the distinction between  AC and non-AC restaurants. “There is a consensus that there is no need for a distinction between AC and non-AC restaurants. 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 GST Council. The final decision will be taken by Finance Minister Arun Jaitley in November 9 GST Council meeting in Guwahati. 

Besides, the panel will also decide whether AC restaurants 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 restaurants get rebates for the taxes they pay on various items used in the course of their business. However, there have been complaints that many restaurants did not pass on the benefit of this rebate to consumers. 

The GST 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

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