Restaurants fall in line on GST as new rates kick in

NEW DELHI: Restaurants across the country on Wednesday complied with the lower goods and services tax (GST) rate of 5 per cent after initial reluctance to do so, at least from some quarters. The new GST rates for a host of items — from washing powders and razors to shampoo and watches — kicked in from Wednesday, days after the GST Council pared rates+ on over 200 items, including 178 in the top bracket of 28 per cent.
Some members of the National Restaurants Association of India (NRAI), which largely represents upmarket chains, have been complaining about the government’s decision to withdraw input tax credit (ITC) and have argued that menu prices may rise by around 6 per cent due to withdrawal of the benefit, which the trade body has said is a key characteristic of GST.
Almost all other associations have welcomed the move, arguing that it will not just benefit consumers but also make life simpler for restaurant owners, who do not have to comply with complicated filing requirements. “It is very positive for everyone and there is no increase in prices,” said Adarsh Shetty, president, Indian Hotel and Restaurant Association (AHAR).

NRAI too said the government’s decision was a step in the right direction although a source present in a closed-door meeting of some of the restaurant associations said some of the eateries were suggesting that prices on the ground will not change due to withdrawal of ITC. “We are all on the same page and we welcome the decision,” NRAI president Riyaaz Amlani told TOI, adding that the trade body will make a “logical case” for reintroduction of tax credits.
For organised chains, the major concern is the tax that they pay on rent, which can add up to 20-25 per cent of the annual expenditure. With a credit on 18 per cent tax paid on rent, a part of the gains were available to restaurants by way of lower costs. It’s a different matter that they argued before the government that the overall benefit from ITC was only 1 per cent, which the government believed added up to 6 per cent — a figure that now tallies with the calculation being dished out by some of the chains.


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