Variation in the tax rate on GST Common portal for small, medium and large restaurant owners & how it is going to alter the restaurant business.

Different sectors of Indian economy are going to be effected differently once the GST bill is implemented. But the most important among them to the common people are the changes that will take place in the restaurant sector. Here we’ll have a look at the impact that will be made once GST comes to force on GST common portal.

Ø  According to 2013 India’s Food Service Report put forth by NRA or National Restaurant Association the present status of the Indian food service industry is Rs. 2,47,680 crore and is estimated to increase to Rs. 4,08,040 crore by 2018 at the rate of 11%. The growth in this specific sector is due to the increasing middle class people in India who are coping up with the western culture & the rapid urbanization these days. But the happy faces outside any restaurants turn gloomy as soon as the see the bill. A minimum meal of Rs. 250 ends up being Rs. 300 including all sorts of VAT & other taxes that the customer isn’t even aware of.

Ø  Once the GST comes to force all the taxes that a customer had to pay even without knowing them like VAT, Service Tax, etc that was included with the price of the food will no longer be charged as now you’ve to pay only one uniform rate.

Ø  If GST is implemented effectively then the amount of tax that the consumers are paying now i.e. approximately 20.5% will drop down to 18%, an approximate decline of 1.8% of tax.

Ø  In a situation like this - a restaurant owner has purchased goods worth Rs.2, 500, in the & the total amount payable to the tax authorities under the current regime sums up to Rs. 433.50. But when GST will be implemented, the cash that will flow out from the pocket will be Rs.226, thus his working capital will be enhanced to the extent of Rs. 207.50.

Ø   There will be different tax slabs set for restaurants depending on their turnover and whether they have air-conditioning system or not.

Ø  Restaurants whose turnover is less than Rs 50 lakh will have to pay a tax rate of 5 %

Ø  Non-AC restaurants will be charged 12% GST on food bill. Where as the rates for AC restaurants and those with liquor license will have to pay 18%, & restaurants in 5-star hotels will be having a GST rate of 28%

Ø  Having foods at restaurants will become more costly in metropolitan cities like Mumbai, Delhi where the existing tax rate is around 10.6% which will include both VAT and Service tax. Post GST, the customers will be taxed at 18 % for having food in AC restaurants.

Ø  For a non-AC restaurant, the current tax rate is at 6 per cent. From 1^st  July onwards small joints will be taxed at 12 per cent. 

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