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Expansion 2017-05-22

GST to make eating out more costlier, affect employment

Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 per cent

By Deputy Features Editor
GST to make eating out more costlier, affect employment

Restaurant and hotel industry has been under continuous scanner making 2017 a touch year for the industry to grow. From the service charge issue complicating the business of restaurants to banning liquor at some of the prominent food locations in the country and asking restaurants to allow people to pee at restaurants can be termed as an unconventional time for the business. And, yet another big announcement, GST will now make eating out more expensive allowing customer to spend more on the taxes at some of their favourite restaurants.

“The GST rates on hospitality industry came with a big surprise for us. And for a group like ours which got 5 Star, 4 star and budget hotels in the portfolio it’s a mix of good and bad news. On one side it is positive for the budget hotels as the rates are lower than the one operating at present and will definitely ease the pockets of travelers but on the other side staying in luxury hotels will get more expensive as it got the highest tax incidence of 28%. This will bring additional burden to guests who are choosing a luxury stay because even the restaurants in these hotels will attract 28% rate which I personally feel little unfair," shared CK Baljee, Chairman & MD Royal Orchid Hotels.

According to the latest GST update budget hotels will attract low or even nil in the case of those charging less than Rs 1,000 a day for rooms. Hotels that are charging Rs 5,000 and more room tariff per day will have to pay 28 per cent GST which is a big threat to country’s developing tourism and hospitality. Restaurants in such hotels, too, will have to pay 28 per cent GST.

Similarly, Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 per cent. Non-ac restaurants will have a 12% tax rate. AC restaurants will have to shell out 18% tax making diners to think before they step out for eating out. “The government has not realised the importance of providing impetus to hospitality and tourism sectors, which are one of the highest employment generating sectors,” said Riyaaz Amlani, President, NRAI, adding that it is not fully invested in maximising the potential of the sector. While we appreciate the move of shielding the smaller players in the sector with a lower tax bracket, why are restaurants being incentivised to show less turnover, added Amlani.

At a time when Indian restaurants are setting up global standards and are upgrading their service to that of international level contributing highly into the overall country’s economy such moves would really affect the growth of the sector hampering many small and big businesses. Restaurant industry alone employs over 5.8 million people in the sector. Commenting on the same, industry experts where of the view that Experts said all hotels and restaurants should have qualified for lower tax slabs as they are critical employment generators for the economy and are very critical for tourism. 

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