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GST cuts restaurant business by 35%

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Eating out at a restaurant has become an indulgence after the implementation of goods and services tax (GST), as business is down by an estimated 35%, say restaurateurs across Gujarat.

GST cuts restaurant business by 35%AHMEDABAD: Eating out at a restaurant has become an indulgence after the implementation of goods and services tax (GST), as business is down by an estimated 35%, say restaurateurs across Gujarat. Customers seem to be feeling the pinch of 18% GST imposed on the service sector. “Restaurant business has certainly dipped after GST, even over weekends. Regular customers also don’t visit restaurants as often as they used to,” said Narendra Somani, president of the Hotels and Restaurants Association.

A number of restaurants have seen a 50% hit to business. “With 18% tax, bills have been rounded up and prices have risen by 20% at most restaurants. For instance, a thaali which earlier cost Rs 300 will now be billed at Rs 360. A family of four visiting four times a month now visits just once or twice a month,” said Dilip Thakkar, a partner at a city-based restaurant.

Some restaurants opted for the composite scheme and did not passed on the tax burden on consumers. “Despite opting for composite scheme where our tax burden reduces, our business is down by at least 15-20%. Customers are price-sensitive and we cannot increase prices else, or we will further face losses,” said Aron Fernandes, the proprietor of a restaurant in Chandkheda.

Even in Surat, business is down by at least 20%-25%, according to South Gujarat Hotel and Restaurant Association (SHARA) vice president Sanat Reliya. Home delivery and takeaway businesses are also badly hit and have declined by at least 50%.

“Customers don’t want to spend more when ordering at home and the additional 18% increase does not go well with many,” said Ankit Chona, a city-based restaurateur.

Some believe that festival business will be impacted to a great extent by GST. “We expect sales at restaurants in the city to drop by at least 50% during the Diwali holidays peak time as 18% GST will inflate the bill amount,” said Reliya.

Others however, believe the 18% GST had a psychological impact on people. “Customers did feel that 18% GST is too high but now most have accepted it and are eating out as they used to. Earlier, service tax and VAT on food was more or less the same,” said Nitin Nanavaty, who owns four restaurants in Vadodara.

About food prices he said, “Some raw materials are now under GST so that’s an added cost. It however depends on restaurateurs if they want to absorb these costs or pass it on to the customers.”

Source: ET Retail

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