Committee bats for 12 per cent GST on AC eateries

The GoM was tasked with revisiting the tax structure of varied categories of restaurants with the aim of rationalising the rates, apart from making composition scheme attractive for businesses

The Group of Ministers set up to make GST composition scheme more attractive Sunday suggested lowering tax rates for manufacturers and restaurants under the plan to 1 per cent. At present, while manufacturers pay GST at 2 per cent, the rate for restaurants is 5 per cent. Traders currently pay 1 per cent. The GoM headed by Assam Finance Minister Himanta Biswa Sarma has also suggested doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under composition scheme, and tax them at 12 per cent. It also suggested that hotels which has room tariff of more than Rs 7,500 should attract 18 per cent tax rate.

Composition scheme is open for manufacturers, restaurants and traders whose turnover does not exceed Rs 1 crore. This threshold was earlier Rs 75 lakh and the GST Council earlier this month raised it to Rs 1 crore from October 1. With regard to traders, the GoM suggested two pronged approach for taxation under the scheme. It suggested that traders who want to exclude the sale proceeds of tax-free items from its turnover, it can pay 1 per cent GST. However, those traders who pay tax on total turnover, the tax rate has been proposed at 0.5 per cent. For example, supposing a trader deals in goods which are tax exempt as well as those which are taxable under the GST and has a turnover of Rs 1 crore. Of this, Rs 40 lakh turnover is from sale of tax-exempt items and remaining Rs 60 lakh from taxable goods. "The GoM decided that tax rates under composition scheme for restaurants and manufacturers be lowered to 1 per cent. For traders the ministerial group suggested two tax rates," an official told PTI.

The GoM also recommended allowing businesses who are engaged in inter-state sale to avail the composition scheme, he added. Around 15 lakh businesses opted for composition scheme, which allows them to pay taxes at a concessional rate and makes compliance easy, under the Goods and Services Tax (GST) which rolled out from July 1. There are over 1 crore businesses registered under GST.