Factors on Implementing GST in Restaurant & Food Industry

Goods & Services Tax (GST) is a direct approach to an indirect tax scheme.   The “One Nation One tax” brings several state collected taxes like the (VAT)value-added tax, entertainment tax, sales tax, cess, excise tax, purchase tax etc.  The two sections of the GST will be the Central GST (CGST) and the State GST (SGST).   Finance minister says that this change will bring a uniform market across the country & boost growth rates.

With present multiple taxes being levied, cost of dining out is expected to reduce by 2 – 4 %.  GST will be a boon to business owners as tax will be collected on consumption other than production.  Inventory & raw materials can be obtained at subsidized rates from agriculturists and farmers as taxes remain same across states.  Thus, reducing the overall cost substantially & making the restaurant business manageable.   Although, GST paid at 18% is higher than the current rates, the final cost to consumer decreases.  Consumers will be happy to see one tax without having to scan across calculating multiple taxes & GST may come down to 18% of the total value of the bill.

Detailed Tax Rates for Restaurants.

Finance minister declared that depending on turnover & the type of service provided, tax is divided for Restaurants like:

• AC restaurants & those with liquor license will be levied 18% tax
• Non-AC restaurants will be charged 12% tax
• Restaurants with a annual profit of less than 50 lakhs will be charged 5%
• Fine-Dine restaurants will impose a 28% tax

The overall cost of the food & restaurant industry is likely to decrease under the new GST regime.   A single tax bill saves up to 10-15 % on the total bill.

All transactions will be reported & expenses will be recorded, Restaurateurs will increase transparency in business & increase profits over the long run.

Government provides complete support in implementing the new levied tax structure & assist in claiming the VAT returns as well.   This change will also encourage every SMB in the Food & Restaurant industry to hop on to the online brand wagon & move up towards digitization.

GST plans to reject cascading effect of tax. All inputs credits can be utilized and it will bring down the tax burden on account of usage of credit. The credit can be claimed only after it matches the invoice of the respective suppliers.In the current tax regime, tax credit claims under various tax laws are not allowed. For eg: tax credit on account of taxes paid under excise duty cannot be claimed against service tax dues and vice versa.

therefore, it remains to be seen whether the GST will bring in a change in the Food & Restaurant industry.  The Restaurateurs or Suppliers & even Consumers can rejoice over the fact that it is about to bring some difference