Alcohol-serving eateries cry foul over GST bias

KOLKATA: Restaurants in Kolkata will appeal to GST Council to remove the discrimination in tax rates against eateries serving alcohol. This, they claim, has adversely affected the city’s booming food and beverages sector.
Under the GST regime, all restaurants that serve alcohol — whether or not air-conditioned — charge 18% tax on food while their no-alcohol and non-AC counterparts charge 12%. Even though the earlier tax on alcohol has been withdrawn since GST came into effect on July 1, the relief to ‘dry joints’ could lure away customers from the alcohol-serving restaurants which drive the industry in Kolkata, insiders point out. The Hotel and Restaurants Association of Eastern India (HRAEI) is now planning to seek a uniform GST irrespective of whether a restaurant serves alcohol or not.
“A large number of restaurants serve alcohol, but they rely on food sales to drive their business. The lower tax at non-alcohol joints has been eating into their business, which is unfair. Also, this discriminatory tax is an incentive to bar alcohol, which is not an encouraging sign. In Kolkata, the food and beverages sector has grown exponentially over the last decade, thanks largely to the rise in the number of restaurants serving liquor,” said Sudesh Poddar, president, HRAEI.
Till GST came into force, restaurants charged 20.5% tax on food and 6% tax on alcohol. The latter was withdrawn and a uniform 18% GST came into effect. But non-AC restaurants not serving alcohol were allowed to charge 12%.
“My restaurants don’t rely on alcohol for sales, but it does attract even those who are looking at just food. People love to order a glass of beer or whisky while waiting for food to be served. If they have to pay additional tax on food for that, it’s unfair,” felt Nitin Kothari, owner of Mocambo and Peter Cat. He, however, added that some extra tax for AC restaurants was fair. “It has always been there. But making a differentiation on the basis of liquor availability is not acceptable,” said Kothari.
The GST Council has set up a five-member committee to review the existing tax structure. It will meet soon. “We are pinning hopes on the committee to remove the tax discrepancy. It must be remembered that almost all leading city restaurants are AC and serve alcohol. But the tax differentiation is forcing their patrons to pay extra tax on food. It is also unfair on those who don’t order alcohol. The latter would rather go to a dry eatery. If that happens, the majority of Kolkata’s restaurants will suffer,” said the owner of another Park Street eatery.
The HRAEI will meet to draft a letter to be sent to the GST council. “We believe that there should no discrimination between restaurants on the basis of alcohol availability,” said Poddar. There is a hope that the committee shall recommend a 12% per cent uniform tax rate that will make the eating out experience more cheerful, according Saloni Roy, senior director, Deloitte Haskins & Sells LLP, a leading GST consultant. “Eating out is always a pleasure, but the pre-GST tax structure was too steep. There has been an announcement that a committee has been set up to review the GST rate and we hope that the discrimination will be removed,” said Roy.
All restaurants should be taxed at the same rate, felt Hrishi Bajoria, owner of Chili’s. “This discrimination against those serving alcohol is unfair. We need a level playing field,” said Bajoria.
Other than the tax discrepancy, the committee should also look into a few other grey areas, felt Poddar. “It is not clear whether star hotels serving food on the poolside, which is not an air-conditioned area, should be charging an 18% GST. There are several five-star hotels in the city which have multiple non-AC sections where food is served,” said Poddar.