- October 26, 2017 / 3 min readUnder the GST regime implemented on July 1 2017 air-conditioned restaurants pay 18% GST on food
National Association of India has said that eating will get more expensive if government goes ahead with the proposal of reducing GST rate of restaurants from 18% to 12% without input credit claims. As per media reports government are considering to bringing down GST rate from 18% to 12%.
Under the GST regime implemented on July 1, 2017, air-conditioned restaurants pay 18% GST on food. However, if the GST rate is brought down to 12%, then in the absence of input tax credit, they will not able to claim these tax rebates, resulting in an increasing in their operational costs by 7% -10%. In the earlier tax regime, restaurants were allowed an input tax credit on things like food items, cutlery etc, NRAI stated.
Ritaaz Amlani, President of the national Restaurant Association of India said” Under the earlier tax regime, the tax on processed food was at 5%, but now under GST, this has gone up to 12%. Taxes on many such inputs have gone up, so if we do not get an input tax credit, then our cost of running the restaurants will go up, leading to higher menu prices for customers. Best part about the GST scheme is complete pass- through of taxes via Input Tax Credit (ITC). ITC works in a way that all vendors and suppliers who may have earlier been in the unorganised sector are incentivised to come under the organised sector and file tax returns. Disallowing input tax credit will lead to higher operational costs for restaurants, ultimately leading to a rise in price of final products for consumers. Hopes the proposal is not implemented in its current form and that the industry’s views should be taken into consideration”.
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