GST rate cut: Restaurant body to meet govt over pricing

The National Restaurant Association of India (NRAI) is likely to make a representation to the government over the next two days regarding the passing on of benefits of the lower goods and services tax (GST) rates to consumers.

NRAI has the country’s top fast-food chains, among others, as its members.

The government on November 10 had slashed the GST on AC and non-AC restaurants — excluding five-star hotels — to 5 per cent from the earlier 18 per cent and 12 per cent, respectively.

But the input tax credit was withdrawn with the rate revision, prompting restaurant chains, including McDonald’s, to withhold passing the full benefit of the tax cut. Their argument was that the nonavailability of input tax credit pushed up costs by 10-12 per cent, implying that the 13 per cent GST cut was tax-neutral.

“While we welcome the move by the government to cut GST, it may have to relook the issue pertaining to input tax credit,” said NRAI President Riyaaz Amlani. He is also the chief executive officer and managing director of Impresario Entertainment and Hospitality, which runs restaurants such as Smoke House Deli and Social. “If the consumer has to benefit on the pricing front, the rate cut will have to be tax efficient (to restaurants). Currently, it is not,” he added.

Typically, input tax credit is given on rent, food and other items, and was available to restaurants before implementation of the GST as well.

In a statement, a McDonald’s India spokesperson said it had passed on the benefits, wherever it could, to consumers: “We have substantially reduced the prices of some of our flagship products. We have been open about our prices and our menu board prices are inclusive of taxes.”