CHENNAI: Though the Centre has reduced the Goods and Service Tax (GST) rates from 18 or 12 to five per cent, food prices in city’s restaurants have not declined. While this has irked consumers, restaurateurs argue that they are merely compensating as the benefit of input tax credit has been taken away from them.
The Centre on November 10 slashed the GST rates for restaurants by up to 15 per cent, barring those that serve food in luxury hotels and banquet halls.
But at the same time, it took away the benefit of input tax credit, for food outlets that earn an annual revenue of Rs 1 crore or more. Finance Minister Arun Jaitley said that it was removed as restaurant owners were not passing on the benefit of lower tax incidence to consumers.
Consumers who were relieved to hear the slash in rates, were however, surprised to see that the final amount printed on the bill continued to remain the same in many restaurants.”I used to pay about Rs 42 for a coffee at this restaurant when 18 per cent GST rate was charged. That is, the tax was about Rs 8. However, even after the rates were brought down to five per cent, my bill still remains the same,” complained KA Venkatachalapathy, a resident of T Nagar, who was a regular to a popular chain of vegetarian restaurant in Chennai.
There were many others who took to social media, tweeting and sharing pictures of old and new bills that hiked the menu prices to sustain the total price to match the 18 per cent GST rates time. Pointing to McDonalds, a popular international fast food chain- a user tweeted, “Shame on you @McDonaldsIndia Not passing on GST benefit to customers should be a crime @FinMinIndia Please take action!”
The restaurant quickly tweeted back explaining that slashing GST rate to five per cent removed the benefit of input tax credit for restaurant owners.
“The operation cost has gone up as we cannot claim input credit. We started purchasing goods from suppliers who were already registered under GST, in order to claim input credit. We can’t do that anymore,” said a senior adviser to the South India Hotels and Restaurants Association (SIHRA).
The input tax credit meant that restaurants could claim the tax they pay to obtain raw materials in the final tax. In restaurants, this can be up to 4 per cent of the tax. To compensate for the operating charges, many restaurants have have hiked the menu price.
However, smaller food outlets have welcome the declined tax rates as they hope it will bring back the customers they lost after the implementation of GST. “We expect to reduce the price eventually once we have clearer idea about the input tax we lose. But until then many food outlets will continue to hike prices,” said T Natarajan, honourary secretary of the South India Hotels and Restaurants Association (SIHRA).