GST rate for restaurants cut to 5%: Will dining out really get cheaper?
Dining out has now become cheaper after the Goods and Services Tax (GST) council on Friday reduced taxed on all restaurants barring high-end hotels, to 5 per cent from 12 and 18 per cent earlier depending on the type of (AC or non-AC) restaurants. However, restaurants with annual turnover of Rs 1 crore or more won’t get the benefit of input tax credit (ITC), a facility to set off tax paid on inputs with final tax, which will increase the cost of their products now and may not allow restaurateurs to pass on the benefits of reduced GST.
“Restaurants, however, did not pass on the input tax credit (ITC) to customers and so the ITC facility is being withdrawn and a uniform 5 per cent tax is levied on all restaurants without the distinction of AC or non-AC,” Finance Minister Arun Jaitley said after the GST Council meeting.
Restaurants say they may have to raise the menu price to offset the increased cost arising out of withdrawal of input tax credit. The Federation of Hotel and Restaurant Association of India had earlier asked the government to slash the GST rate while keeping input tax credit benefit intact.
Meanwhile, restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 per cent GST with ITC benefits.
The GST Council on Friday pruned the list of items in the top 28 per cent Goods and Services Tax (GST) slab to just 50 from current 228. So, only luxury and sins goods are now only in highest tax bracket and items of daily use are shifted to 18 per cent.
The new tax rates will be effective November 15. (With inputs from PTI)