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HC issues notice to Centre over input tax credit denial to restaurants

GST rate on restaurants was cut from 18 per cent to 5 per cent in November 2017, but without any input tax credit

Dilasha Seth  |  New Delhi 

GST

The Gujarat High Court has issued a notice to the Centre seeking to know why the option of under (GST) regime is not available for restaurants, unlike others.

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 by paying a higher rate of tax.

rate on restaurants was cut from 18 per cent to 5 per cent in November 2017, but without any When they were charged at 18 per cent, they could avail of the input tax credit.

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 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.

First Published: Mon, November 18 2019. 22:17 IST
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