Are you a foodie losing your appetite due to confusion pertaining to new prices of restaurant food under the GST regime? Do post-GST restaurant bills confuse you? You needn’t worry further.
Although restaurant bills might come across as confusing under the new GST regime, they’re not particularly difficult to understand when broken down into simple components.
We walk you through it.
Understanding the pre-GST tax regime
In the pre-GST era, restaurants were burdened with multiple taxes – state, central, and other charges and cesses.
On every food and beverage bill, customers had to pay a value added tax (VAT), service taxes where applicable, and other cesses like Swachh Bharat cess, Krishi Kalyan cess etc.
All these have been consolidated under the umbrella of GST in the new tax regime.
Restaurant billing under the GST regime’s revised rates
Initially, different GST rates were fixed for mainly two different categories – AC restaurants attracted an 18% GST, while non-AC restaurants attracted a 12% GST.
Under the new rates, all restaurants have to pay 5% GST without any input tax credit, while 18% GST applies to outdoor catering and restaurants in hotels with room tariffs above Rs. 7,500.
Understanding the Input Tax Credit system (ITC)
Under the new GST slab, the ITC system has been removed for restaurants on which 5% GST is applicable. Only restaurants paying 18% GST can use ITC.
Although smaller restaurants have had to push up menu prices to adjust for the same, it has made eating out cheaper for the customer who has to pay a lower net amount despite higher food prices.