Restau­rants want GST Rate Cut, and Also Claim In­put Tax Credit

In­dus­try play­ers say they will be forced to pass on the bur­den to con­sumers if this sop is taken away

The Economic Times - - Economy: Macro, Micro & More - Ratna.Bhushan@ times­

New Delhi: The restau­rant in­dus­try is hope­ful of the GST Coun­cil ac­cept­ing a min­is­te­rial panel’s rec­om­men­da­tion to re­duce the rate un­der the GST com­po­si­tion scheme to 1% and levy a uni­form tax rate for the rest of the sec­tor. While it ex­pects these to help boost the sec­tor and bring more play­ers into the or­gan­ised seg­ment, the in­dus­try is un­happy about a sug­ges­tion to stop restau­rants from claim­ing in­put tax credit.

Un­der the com­po­si­tion scheme, restau­rants with a turnover of up to ₹ 1 crore cur­rently need to pay a 5% GST. On Sun­day, the Group of Min­is­ters (GoM) rec­om­mended to re­duce this rate, as well as bring down the levy on air-con­di­tioned restau­rants to 12% from 18%, keep­ing it in line with non-AC eater­ies.

While the in­dus­try wel­comed these, it is of the view that the in­put tax credit is­sue could lead to higher con­sumer prices.

“We are hope­ful of de­vel­op­ments which will be pos­i­tive for the sec­tor. As of now, the rec­om­men­da­tion on the in­put tax credit would be in­fla­tion­ary and have a cas­cad­ing im­pact on prices. De­spite the GST re­duc­tion to a flat 12%, if restau­rants are not al­lowed to claim in­put tax credit, we will have no choice but to pass on the bur­den to con­sumers. As it is, it’s been a tough year with the high­way liquor ban,” said Rahul Singh, vice pres­i­dent of the na­tional restau­rant as­so­ci­a­tion, which rep­re­sents thou­sands of In­dian, global restau­rants brands in the coun­try.

The Road Ahead

Singh, who founded The Beer Cafe, said this could also af­fect hir­ing in the sec­tor by up to 20%, as higher op­er­at­ing costs would hurt their ex­pan­sion plans.

The fi­nal de­ci­sion on the rec­om­men­da­tions is ex­pected over the next fort­night.

As per the ex­ist­ing tax slabs, restau­rants are al­lowed to claim credit on taxes paid on in­puts, such as pro­cessed foods, as well as fixed op­er­at­ing costs like store rentals and on trans­porta­tion. With the im­ple­men­ta­tion of GST, com­pa­nies said taxes on var­i­ous in­puts have gone up. Con­sumers may pos­si­bly have to shell out at least 10% more for eat­ing out start­ing this win­ter — the steep­est price hike by the restau­rant in­dus­try this year — if the rec­om­men­da­tion of dis­al­low­ing claims on in­put tax credit is ac­cepted, in­dus­try ex­ec­u­tives said.

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