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Eating out cheaper post-GST? Why it depends on your menu


NEW DELHI: If you are expecting your restaurant bill to go down, you will have to wait for some time. Revenue secretary Hasmukh Adhia did claim at a Goods and Services Tax (GST) masterclass that restaurants, hotels and eateries could cut their food rates to reflect the benefit of input tax credit (ITC), but restaurateurs, only now coming to terms with GST, are still playing the waiting game to gauge the impact.

ITC, put simply, is the credit restaurants get on the taxes already paid on inputs (raw supplies, rentals, marketing, etc) that can be set off against the taxes they pay on outputs or earnings. Rather than applying for various credits like earlier, they can now avail the tax set-off under one broad service tax slab. Since the limits of credits are going to increase, Adhia urged eateries to pass those benefits to consumers.

Riyaaz Amlani, president of National Restaurant Association of India (NRAI) and CEO of Impresario Entertainment and Hospitality which has multiple outlets across the country, was keen to let consumers benefit from any price decreases, but said he was still ascertaining the impact of GST and ITC on costs.

“Lower prices will definitely mean more customers, so we would be the first ones to pass on the benefits to consumers,” said Riyaaz.

Rahul Singh, CEO of The Beer Cafe and honorary secretary of NRAI, points out that such benefit would accrue to food outlets and only minimally for places that have higher alcohol sales. “Alcohol is not a part of GST and still attracts VAT. If food accounts for 30% of the sales and alcohol for the rest, the benefits would not amount to much,” he reckoned. Singh, however, added that while the actual benefits could be visible only after a quarter, “I broadly see reduction in the food menu by 3-5%”. The fact that alcohol still attracts VAT while food come sunder GST is one reason why restaurants are reluctant to directly decrease prices. As Priyank Sukhija of First Fiddle, which operates the popular Lord of the Drinks and Tamasha, explained, he is unable to register any input credit on alcohol, which is a major part of his sales, and so he would rather not charge additional on alcohol and cut food costs minimally.

Zoravar Kalra, founder and managing director of Massive Restaurants, which run 17 outlets across India such as Masala Library and Kode, similarly said, “Since our purchase costs will increase due to higher alcohol prices, we will wait to see how much benefits we can pass on.” He called the new tax regime a “zero sum game” due to the skew on differing benefits on food and alcohol.
Source: Times of India

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