GST cut on restaurants gets mixed response from industry

Bhubaneswar: Foodies have a reason to cheer about as they have to pay less on their dine-out bills. Centre has slashed 13% GST on eating out from 18% to a uniform 5%, which has been implemented since Wednesday. However, the tax-cut is unlikely to get reflected on their bills as hoteliers are planning to increase prices of the menu. “Between July to November this year the diners have seen a reduction of 16.5% in taxes from 21.5% to 5%. That’s a huge cost saving for the diners. This will surely give a boost to the dining out scenario and will also be good for many businesses which saw a dip in sales,” said Rohit Srivastava, founder of The FoodFindo Network, a group of foodies.

The slash on GST rates has got a mixed response from the industry as some hoteliers feel it will help both the businessmen and the customers in a long-run while others feel they have no option but to increase the prices of menus to make it for the Input Tax Credit (ITC), which the government has scrapped. “Cutting down GST from 18% to uniform 5% is a welcome step and it will benefit both industry and customer in the long run. But immediately hoteliers will incur some loss as the government has stopped giving input tax credit but it will boost consumption and the bill will certainly be cheaper than earlier,” said

J K Mohanty

, chairman of Hotel and

Restaurant Association of Odisha

(HRAO).

The hoteliers are also expecting a rise in business and footfall following the tax-cut implemented from November 15. “Prior to GST people used to pay 22% tax on eating out at AC restaurants and post GST it was reduced to 18 %. Now it has further reduced to a uniform 5%, which will certainly benefit the customers. If customers are happy then business will grow. Moreover the volume of profit of hoteliers has not reduced, so there is nothing to be very reactive,” said

Sushant Mishra

, who runs a chain of restaurants in the city. However, there is a concern among the customers as well as hoteliers that restaurants may increase the prices of menu to accommodate the scrapping of ITC, which the hotels used to get refunded to offset the tax paid for raw materials with the final tax.

“There is no option left for hoteliers apart from increasing the prices of menu. Several big players have started doing so in metros while businessmen in smaller cities are waiting for someone to take the initiative. The ITC was like a support mechanism for the restaurant industry,” said Debashis Patnaik, founder of a popular chain of hotels. Sources said, the ITC on food items was not much as majority of raw materials they use are perishable items like vegetables or meat, fish, chicken and egg. Even on grocery items also the ITC was on selected items.

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