This was in response to a writ petition filed by Hardcastle Restaurants, which is the master franchisee for McDonald’s, against the Centre, asking for the option to avail of input tax credit by paying a higher rate of tax.
The National Restaurant Association of India, which represents more than 500,000 restaurants, had this year written to the revenue secretary, arguing that the denial of input tax credit had adversely impacted the sector, leading to closure of 20,000 outlets last year.
The restaurants’ body suggested for availability of option to either claim the input tax credit with a GST rate of 12 per cent or pay 5 per cent GST without that.
The writ was admitted by the Gujarat High Court on November 14. A notice was issued to the Centre, which has time till December 11 to respond.
Abhishek Jain, tax partner at EY, said while a lower rate had optically fared well with customers, a denial of input tax credit to restaurant businesses had increased their tax costs. “These businesses have for long been discussing with the government on an optional higher rate with input tax credit and would now also look forward to the final high court ruling on this,” said Jain.