Mumbai: The Indian Hotel and Restaurant Association (AHAR) on Monday said its members will implement the reduction in Goods and Services Tax (GST) from 18% to 5% in Mumbai from November 15, making eating out and home deliveries popular again.
At a press conference, AHAR president Adarsh Shetty rubbished rumours of prices going up in menus. “They would neither rise nor be reduced. The Central GST (CGST) and State GST (SGST) levied will be 2.5% each.” The association said its priority was to ensure that the 30% loss in revenue due to high GST is recovered. “30% of my business would come from deliveries. The application of [18%] GST wiped that out,” Mr. Shetty said.
He added that GST was charged at 12% on non air conditioned restaurants and at 18% on air conditioned ones. He said of the 12,000 members, some have establishments which are both AC and non-AC. “Mumbai has a trend of partly air conditioned restaurants, where if 10 tables are in the AC area, 15 are in the non-AC area. The different rates were imposed only on our industry. This became applicable to home delivery and takeaway services as well. This is why people soon stopped using these services, and 90% of this section of our business was wiped out.”
Mr. Shetty said that even before GST was implemented, hundreds of eateries were shutting down due to high overhead costs. The base menu price would come down if the cost of raw materials fell. “These costs are much more than other costs. We’re hit by the cost of electricity, kitchen and manpower. Our business is totally dependent on manpower. Also, the cost of vegetables has gone up by 200%.”
AHAR has come up with posters thanking the government for reducing GST. These will be distributed to all members and will be placed at the entrance of AHAR-affiliated establishments. “Our software needs to be updated after the change in GST. This will be done by an external agency. We want to make sure that the transition process is smooth,” Mr. Shetty said.
He said service tax won’t be affected. “Service tax depends on the establishment. Due to high GST, we had asked members to remove service tax. Many complied, as it adds to menu prices.”