The introduction of the Goods and Services Tax (GST) Bill has aroused surprise and debates over its impact on manufacturers as well as customers. According to the proposed GST Bill, a four-tier structure of 5%, 12%, 18%, and 28%, respectively, has been set, wherein tax might be levied at more than one price ranging from 0% to 28%. As such, essential items together with food, which constitutes about half of the consumer inflation basket in addition to essential food-grains had been exempted from the GST and may be taxed at zero rates. The lowest slab of 5% tax may be applicable simplest on not unusual use items, even as the highest slab tax of 28% may be levied on luxury goods.

While it had been previously stated that the impact of GST would appear to be impartial on the restaurant industry, with the tax on consumer goods coming down from 30% to the predicted standard price of 18% and the simplification of bills, it, without a doubt, appears to have a positive effect on the restaurant industry.

With the outset of the GST, there is expected to be a commendable effect on the restaurant enterprise. In this article, we are going to find out how GST is predicted to have an effect on the India Food Service and restaurant business.

Impact of GST on Restaurant Food and Prices of Liquor

The basic food cost at restaurants is, in all likelihood, to decrease under the new GST regulations. Edible oil, tea, coffee, and spices which are currently taxed at 3% to 9% may now be reduced to 5%, whilst items taxed at 9% to 15% at present might be taxed at 12%. Items that presently fall inside the 15 to 21 percent range will drop to 18%, hence affecting the overall food price.

The proposed slab is steeper than the contemporary tax rates with objects of mass intake such as food-grains can be taxed at 5% instead of the current 6%, even as processed food could be charged at 12% in place of the present day 15%. Alcohol and aerated drinks that come underneath the Luxury category may even attract an additional cess in conjunction with the tax of 28%. Compared to the other restaurant formats inclusive of informal dining on brief serving eating places, pubs and eating places serving liquor might be negatively affected, because the high price of alcohol is probably to decrease bar sales.

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

Food price, on an average, represents about 25-40 percentage of the restaurant value that is accompanied via labour price that represents approximately 25-35 percentage. There is not any other cost within the restaurant price shape as high because the food value; hence, restaurants ought to intention at preserving their food fee among 28-35 percentage in their total operating budget. Thus, a decrease in the food price is in all likelihood to advantage the hospitality industry.

Impact of GST on Restaurant Bills

The GST seems to signify positive information for the restaurants as the multiple taxes could be removed, resulting in reduced payments. Cheaper bills are sure to attract clients and might bring about an overall growth in the restaurant business.

A bill with a single tax structured could save as much as 10-15 per cent on the overall bill. Entertainment, luxury, and other service taxes in the hospitality industry are predicted to draw a rate of 18% as against the prevailing 22%.

“The restaurant enterprise has been harassed with excessive and more than one taxation. NRAI has been advocating for reduction/simplification of the same. We welcome the Centre’s move for the advent 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 presently face (extra than 22%). VAT, Service Tax, and Luxury Tax combine to head as much as 20-27 percentage. Under GST, the more than one taxes will come all the way down to a single tax that is probable to be 18%.

While the GST bill proposes of boosting revenue and being economically friendly average, the final tax fee agreed upon, along with two other bills- Central GST (CGST) and Integrated GST (IGST) associated with GST, was approved by the Parliament and implemented the new indirect tax regime on April 2017.

Understanding Your Restaurant Bill

As a consumer, we simply ignore to take note of our food bills at restaurants and many of us aren’t even aware of the components that are included in our food bills.

If you take a proper look at your food bill/invoice from the pre-GST experience, you will see various taxes printed on your food bill, such as Service Tax, Service Charge, VAT that had been included over and above the cost of the meals.

First, let us realize the different components of the food invoice:

VAT: This is the tax charged on the meals part of your invoice.

Service Tax: This is the tax charged on the services provided via the restaurant. To avoid unnecessary complexity, the government had already bifurcated the service portion and food portion and charge taxes accordingly.

Service Charge: This is a fee which is applied with the aid of the restaurants and not by way of the government. This is not a tax. It should no longer be burdened with service tax as that is an earning to the hotels. Service tax is not an income and merely a tax gathered from you and submitted to the government.

However, the rates under GST are vastly exceptional than what you will find before the change in the taxation policy.

The new GST rates for eating at restaurants and hotels would be:

• 5% without ITC at railways/IRTC

• 5% without ITC at stand-alone restaurants

• 5% without ITC at stand-alone outdoor catering services

• 5% without ITC at restaurants within hotels (where room tariff is less than Rs. 7,500)

• 5% without ITC at normal/composite outdoor catering within hotels (where room tariff is less than Rs. 7,500)

• 18% without ITC at restaurants within hotels* (where room tariff is more than or equal to Rs. 7,500)

• 18% with ITC at normal/composite outdoor catering within hotels* (where room tariff is more than or equal to Rs. 7,500)

*This covers individuals dealing in catering or other offerings in hotels (having room tariff of Rs. 7,500 or more) and no longer any hotel accommodation offerings.

Under the GST law, the Service Tax and VAT amount will be subsumed into one single rate, but you may still see service charge on your food bill.

Conclusion

Therefore, we can fairly conclude that GST will bring motives to have a good time for both consumers and restaurant business owners under the reformed GST law, and we will have more motives to explore new food outlets in our region and treat our flavor buds with excessive indulgence.