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GST: How the new tax regime will impact food and restaurant services?

In terms of food services and restaurant services, GST is going to bring rejoice for both restaurant owners and customers

India TV Lifestyle Desk, New Delhi [Published on:30 Jun 2017, 1:07 PM IST]
GST food services and restaurants
How GST is going to affect food services and restaurants

With the strike of midnight hour on Friday, a new regime of tax will be levied in India and it is known as Goods and Service Tax or GST. Ever since India gained freedom 70 years ago, it is the first ever tax reform of such a great magnitude. There will be a special ‘tryst with destiny’ session of Parliament at midnight on Friday. The new tax will lead to surge in prices of many items in the country, the biggest slab of 28% is slapped at the luxury products. With the roll out of GST just a couple of hours away, people are wondering with baited breath, how this new system of taxation is going to affect their lives. We’re going to discuss each and every aspect of our life that will come under the direct impact of GST. Let’s begin with food services and restaurant first. 

Also Read: Know more about GST

According to the National Restaurant Association of India’s 2013 India Food Service Report, current size of Indian food service industry is Rs 2,47,680 crore and it is proposed to go up to Rs. 4,08,040 crore by the year 2018 at the rate of 11%. Being a food enthusiast and a food loving generation, we hardly pay attention to our food bills or do we? Most of us are not aware of the charges imposed on us in the name of tax. 

How will GST affect consumers? 

Earlier, when you visit a restaurant, you’ll find service tax, service charge and VAT being added to your bill. But under the GST regime, service tax and VAT will be included into one single rate. Service charge will remain in some of your restaurant bills. 

There’s a standard rate of 18% under GST. So let us take an example to understand this better. If you have eaten a food amounting to Rs. 2000 at a restaurant, a service charge of Rs. 200 will be levied and Rs. 396 will be charged for GST. This makes your total bill 2596. Under the current regime, the same bill could have rounded up to Rs. 2651, which makes you save Rs. 55 under this new tax regime. 

Also Read: GST impact on your pocket: What gets cheaper and what becomes costlier from July 1

 

How GST will affect restaurant owners? 

Under the ongoing tax regime, the restaurant owners don’t have any option to adjust the output service tax liability with the credit of input VAT on goods consumed. Under GST, both the service tax and VAT are included into GST and thus regardless of goods and services, credit of input will be available for adjustment against the output liability. This can help optimize the working capital of these restaurants and consumers can expect better quality of products. 

In terms of food services and restaurant services, GST is going to bring rejoice for both restaurant owners and customers. 

For more related stories, visit the Food section of Lifestyle