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Good news for foodies: GST ushers hotels, restaurants to scale down prices by 5-10 per cent

Good news for foodies: GST ushers hotels, restaurants to scale down prices by 5-10 per cent

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GST Bill Hotel

Eating out is going to get cheaper as hotels and restaurants in Pune have decided to reduce the price of food items by 5-10 per cent; the prices had recently gone up after the Goods and Services Tax (GST) came into effect. Recently, the GST commissionerate held a meeting with Pune-based hoteliers and urged them to reduce their base prices as their input costs have reduced.

Both AC and non-AC hotels and restaurants in Pune had started charging more from July 1, in view of the 12 and 18 per cent GST slabs applicable to them. Restaurant and hotel bills had increased as hoteliers had started to charge Goods and Services Tax on their existing rates.

Ganesh Shetty, president of the Pune Hotelier’s association, had said that unlike other industries, the hospitality industry did not have the option to offset their taxes based on inputs. “Agricultural inputs do not attract GST so we thought that we could not avail the benefit of the tax offset,” he said.

Rajlakshmi Kadam, deputy commissioner of GST, Pune Zone, said, “During a recent meeting, hoteliers were asked to pass on the benefits they would be getting in view of the reduction in the prices of inputs”. She said that following multiple meetings with hoteliers, the latter have started offering a discount on their existing menu card.

Shetty said the hoteliers have decided to offer between 5-10 per cent discount after their meeting with GST officials, as well as Union minister Prakash Javadekar.

“Soon after GST came into effect, there was a lot of confusion about the tax. We had multiple discussions and have decided to provide the discount in anticipation of the reduction in input costs,” he said.

Around 70 per cent of the restaurants have already printed new menu cards, with the reduced prices, while the rest are in the process of doing so.

K N Shetty, manager of Hotel Roopali, said they have reduced their prices and are charging GST on the new price. “Post July 1, we were charging Goods and Services Tax on the original prices and that had created some unpleasantness with the customers. Now, we have reduced the base prices and are charging GST on them,” he said.

Source: The Indian Express
Impact of GST on Food Services and Restaurant Business in India

Impact of GST on Food Services and Restaurant Business in India

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GST Impact on Restaurants Business

Goods and Services Tax (GST) Bill has been stirring storms and spewing debates over its impact on consumers as well as manufacturers. As per the final proposed GST Bill, a four-tier structure- 5%, 12%, 18% and 28% has been set, where tax will be levied at multiple rates ranging from 0 per cent to 28 per cent.
Essential items including food, which constitutes about half of the consumer inflation basket as well as major foodgrains have been exempted from the GST and will be taxed at zero rates.
The lowest slab of 5% tax will be applicable only on common use goods, while the highest slab tax of 28% will be levied on luxury goods.

Image result for multi tiered system GSt

While it was earlier said that the impact of GST seems to be neutral on the restaurant industry, with the tax on consumer goods coming down from 30% to the expected standard rate of 18% and the simplification of bills, it clearly seems to affect the restaurant industry in a positive manner.

With the outset of the GST, there is expected to be a commendable impact on the restaurant industry. Read on to find how GST is expected to affect your restaurant.

Impact of GST on Restaurant Food and Liquor Costs

The overall food cost of the restaurant kitchen is likely to decrease under the new GST regime.
Edible oil, tea, coffee and spices which are currently taxed 3%-9% will be dropped to 5% while goods taxed at 9-15 percent at present will be taxed at 12%. Items that presently fall in the 15-21 percent range will drop to 18%, thus affecting the overall food cost.

The proposed slab is steeper than the current tax rates with items of mass consumption such as foodgrains will be taxed at 5% as opposed to the current 6%, while processed food will be charged at 12% as opposed to the current 15%. Alcohol and aerated drinks that come under the Luxury category will also attract an additional cess along with the tax of 28%. Compared to the other restaurant formats such as casual dining on quick serving restaurants, pubs and restaurants serving liquor would be negatively affected, as the high cost of alcohol is likely to decrease bar sales.

Alcohol will be charged with a ‘Sin Tax’, which is a tax levied on goods and services that are harmful to health and the society.

Food cost, on an average, represents 25-40 percent of the restaurant cost which is followed by labor cost that represents about 25-35 percent.  There is no other cost in the restaurant cost structure as high as the food cost; hence, restaurants should aim at keeping their food cost between 28-35 percent of their total operating budget. Hence, a reduction the food cost is likely to benefit the hospitality industry.

Impact of GST on Restaurant Bills

The GST spells good news for the restaurants as the multiple taxes will be removed, resulting in reduced bills. Cheaper bills are sure to attract customers and would result in an overall increase in business.

A single tax-structured bill should save up to 10-15 percent on the overall bill.
Entertainment, luxury, and other service taxes in the hospitality industry are expected to attract a rate of 18% as against the existing 22%.

“The restaurant industry has been burdened with high and multiple taxations. NRAI has been advocating for reduction/simplification of the same. We welcome the Centre’s move for the introduction of this much-awaited reform.” said Riyaaz Amlani, president, National Restaurant Association of India.

A government-appointed panel for GST has proposed 18% as GST which is much lower than what the hospitality and luxury sectors currently face (more than 22%).
VAT, Service Tax, and Luxury Tax combine to go up to 20-27 percent. Under GST, the multiple taxes will come down to a single tax which is likely to be 18%.

While the GST bill proposes of boosting revenues and being economically friendly overall, the final tax rate agreed upon, along with two other bills- Central GST (CGST) and Integrated GST (IGST) related to GST, must be approved by the Parliament to kickstart the new indirect tax regime from April 2017. The GST next meeting has been postponed from 9-10th November to 24th-25th November. The preparation of the drafts of the Central GST, State GST, Inter-state GST, and Compensation Law IS expected to be completed by November 14-15. The draft laws will then be sent to the States, which will have one week to respond with any recommendations.