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Expansion 01 Jul 2017

GST to bring uniformity in restaurant taxes

GST for country is a good reform. It is not only a tax reform but a business reform in which non compliant companies will lose the game.

By Nusra Deputy Features Editor

The Goods and Services Tax (GST) which is being implemented from today has brought uniformity in the restaurant industry. In the recent past, there have been fast paced developments regarding the rates and rules. Restaurant industry which has suffered many hurdles in the past few months is cheering high as eating out is getting almost 2% cheaper this year. Though, the ambiguity still exists on some issues, which are likely to settle down once the GST implementation is underway.

“While ambiguity persists on issues like input credit, direct benefits on food and liquor would be passed on to consumers. “Market forces such as competitive pricing will apply too; we will see how the full impact plays out,” shares Riyaaz Amlani, CEO and MD, Impresario Entertainment & Hospitality.

Restaurant chains like chains such as Pizza Hut, KFC, Cafe Coffee Day, McDonald’s, Impresario which runs restaurant chains like Social, Smoke House deli amongst others, Genuine Broaster Chicken have passed an statement saying that they will pass on lower tax benefits under GST from July 1 to their diners.

Commenting on the same, Rahul Shinde, managing director, KFC India shares,"KFC welcomes this long awaited step by the government towards implementing GST. The proposed tax restructuring will bring uniformity in pricing across all our restaurants in the country as well as taxes within the category. Given that our current menu prices are exclusive of any taxes (and same is charged separately on the bill), any benefit on account on reduction in tax rates due to GST shall be passed on to our customers."

“GST for country is a good reform. It is not only a tax reform but a business reform in which non compliant companies will lose the game. However, government should be considerate about small restaurant business and give them flexibility by introducing strict norms in a phase wise manner. Also, clauses like no rebate of tax on civil contracting etc. is unfair as it increases capex by 18% straight,” adds Karan Tanna, CEO, Yellow Tie Hospitality.

While the effective list of tax is so long in restaurants including service tax and VAT which together combines almost 21% varying from state to state and restaurant to restaurant will come down to one uniform rate of 18% across India under GST. According to NRAI food service report, the Indian food service industry is burdened with multiple taxes like VAT and service tax, besides different state taxes, which adds up to 18-25% of the bill value. “The irony of our industry is that it is very labour intensive and employment generating, our government thinks this as a cash cow and wants to extract as much as they can. Instead of supporting us by putting the F&B industry in the GST BRACKET OF 5% as is the norm all around the world, they have put us in the slab of 18% GST,” says Gaurav Sethi, Director at Baris.

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