While the effective tax rate on restaurants so long, including service tax and VAT, added up to around 20.5 per cent — though it varied from state to state —it has come down to one uniform rate of 18 per cent across all states under GST.
“The proposed tax restructuring will bring uniformity in pricing across all our restaurants as well as taxes within the category,” said Rahul Shinde, managing director at KFC India.
“Given that our current menu prices are exclusive of taxes, any benefit on account on reduction in tax rates shall be passed on to our customers.”
Virag Joshi, president at Devyani International, which runs franchisees of Yum Restaurants’ Pizza Hut and KFC among others, said, “We have decided to step up consumer offers across each of our brands.”
Home-grown chain Nirula’s chief executive Amit Chadha too said a series of consumers offers are being rolled out starting July 1. Amit Jatia, vice-chairman at Westlife Development that runs burger and fries chain McDonald’s operations in the South and West, said while final numbers were still being worked out, pricing rationalisation was in the works.
“Implementation of GST will give us the opportunity to look at uniform pricing of products across West and South. We will be able to rationalise prices and display standard inclusive prices,” Jatia said.
Taxation consultancy ClearTax chief executive Archit Gupta said eating out at mid-tier restaurants is going to become cheaper.
“While this is the case for mid- and small restaurants, with GST for luxury and high-end restaurants being fixed at 28 per cent bills at these places would increase marginally.”
In a report published late last year, National Restaurant Association of India estimated size of food services market at Rs 309,110 crore and forecast the restaurant industry to grow 10 per cent over next five years to Rs 498,130 crore. The report listed taxation, realty costs, overlicensing and fragmented supply chains as challenges to growth.
Impresario Entertainment & Hospitality chief executive Riyaaz Amlani said while ambiguity persists on issues like input credit, direct benefits on food and liquor would be passed on to consumers. “Market forces such as competitive pricing will apply too; we will see how the full impact plays out.”
