Tamil Nadu hotels, eateries shut shop over GST rates, other states join

In Tamil Nadu alone, some 200,000 food outlets have closed, and will bear a loss of about Rs 150 cr

The one-day bandh declared by the Tamil Nadu Hotels and Restaurants Association and backed by the South Indian Hotels and Restaurants Association (SIHRA), has seen the food outlets closed down across Tamil Nadu, with restaurants and hotels from other States including Kerala, Andhra Pradesh, Telengana and Karnataka participating.

The shut down is to protest the centre's move to levy tax in a range of 12 to 28 per cent for the sector. Most of the hotels and restaurants in Chennai were closed on Tuesday, in line with the bandh call from 6 am to 6 pm. Some makeshift food joints, however, worked as usual, to the relief of a section of customers.

Hotels and restaurants in Kerala, Andhra Pradesh, Telengana, Puducherry and some parts of Karnataka has also been closed down to support the protest, said M Venkada Subbu, president, Tamil Nadu Hotels and Restaurants Association.

"Almost 500,000 shops including hotels, restaurants, bakeries, large food joints across six states has been shut down from Monday night to Wednesday morning, which would see a loss of around Rs 500 crore," he said. In Tamil Nadu alone, around 200,000 food outlets have closed, and would bear a loss of around Rs 150 crore.

The associations expect a favourable decision to come out from the upcoming GST meeting, failing which the associations in all the six provinces would meet again and take up the protest further, he said.

The standalone restaurants and ordinary hotels in South India are going to take a hit if the GST rates are fixed at the high rates. For instance, the standalone restaurants in Kerala and Puducherry do not have a service charge and just have to pay Value Added Tax (VAT), which is around five per cent, whereas with GST, they have to pay a 12 per cent tax.

In the small hotels in Karnataka, such as the Udupi Hotels, the VAT has been absorbed by the shop keepers so far and the introduction of a high rate of tax would have a negative impact on their business, said sources. For many of the North Indian states, the 12 per cent tax is a lower rate, considering some of them are already paying around 18 per cent tax.

"Despite numerous representations, memorandums to the Authorities the Government has proposed a levy of between 5-18 per cent on the different categories of restaurants and the highest rate applicable for our industry steep levy of 28 per cent GST on hotels with room tariff above Rs 5,000", said the association leadership.

The ordinary and non-star standalone restaurants and eateries cater to the middle and lower class sections of Society and they constitute a major percentage of this Sector. Those industries would be affected due to the new tax regime, they added.