The Goods and Services Tax (GST) is all set to come into effect on 1st July 2017. GST has been touted as one of the most effective reforms in the tax structure of the country that aims to bring in goods and services under a uniform tax cover. It also sets out to put an end to the traditional ‘tax on tax’ system and create a common market for goods and services with a target of making most commodities cheaper than before. We got in touch with some of the leading names in the restaurant industry to get a taste of their sentiments on the GST roll out.
The F&B and restaurant industry had previously pinned down their expectations to the imminent tax reform. Tax relaxation, inclusion of liquor under GST and sufficient incentives to the industry were few of the primary demands made by some of the leading names in the industry. “Our food industry churns out massive revenues and generates huge employment. Shouldn’t we be entitled to some kind of incentives?” noted Sabyasachi Gorai of Lavaash, New Delhi. Unfortunately, there have been no specific incentives stated in the tax regime pointing towards the restaurant industry.
An increased tax levy on five star hotels, liquor selling and fine dining restaurants have upset most restaurateurs. “Aerated drinks are taxed massively at 28% which is a huge hit. A consumer will have to pay more for having these at a restaurant. Liquor is not included in GST which means I will need to pull out two bills for the customer- one for food in compliance with the GST standards and another one that will have liquor separately according to the state tax policy. Every state will have different VAT figures for liquor; all this will just be more cumbersome and may lead to operational challenges,” shared Rahul Singh, President of the National Restaurant Association of India, Haryana who also owns Beer Café.
Cost of inputs
The silver lining
“The reform is excellent for giving a structure to the otherwise extremely complicated tax regime that we followed previously. Earlier, a particular item was sold for a different price in different areas of the country; GST will ensure a uniform price slab now. However, I don’t see the restaurant industry or the restaurateurs benefiting a great deal out of it,” said Mr. Gorai.
“We’re hoping that the GST roll out will help bring much more of the industry under a unified tax umbrella, this could greatly increase the revenues leading to lowered taxes down the line,” noted restaurateur AD Singh.
Revised tax rates on food items
While there exists an option for the restaurateurs to recover the brunt of increased tax via their service, most in the restaurant industry affirm that the total bill for a regular consumer will remain be as it was. “It will remain more or less the same, may even come with a minor reduction,” noted Mr. Kalra. “In my opinion, a customer will end up shelling out just about what he was previously,” shared Rahul Singh.
“I feel it will remain the same, won’t affect the diners much, however, will only get to know the actual effect in 3-6 months,” noted Mr. Gorai.