Eating out may become cheaper from today

Ordering that extra starter or dessert at restaurants may not leave a larger dent in your wallet from today, as the central government had announced that it would reduce the goods and services tax (GST) levied at restaurants from 12 and 18 percent to five percent from November 15. However, till late on Tuesday night, it was unclear whether the cut in GST would roll out from the date announced, as a formal notification from the government was awaited.

Restaurateurs had earlier complained of missing out on business and customers spending less after the new tax rate came into affect. A number of them said that the business was down by over 20 percent, and home delivery and take away orders were also hit.

When GST came into force, there was a uniform 18 percent levied on restaurants that had both AC and non-AC sections, and 12 percent GST was levied on only non-AC restaurants.

"For the past few months, our business, particularly the home delivery and parcels, was badly affected, hitting 30 percent of our business," said Adarsh Shetty, president of AHAR, the Indian Hotel and Restaurant Association.

"There was no reason why a customer who was not sitting in the restaurant should be paying so much tax. Restaurants that had only 10 seats in AC room and 50 in non-AC were finding the same tax unbearable. Now there is rationalization across the board and we are informing our customers," he added.

"Even though a notification is not out yet, we have decided to pass on the benefit of a lower GST rate to our customers. All our members will be charging 5 percent GST from tomorrow. Even if the notification arrives later, we believe it will mention November 15 as the date for the reduced tax to kick in," Shetty added.

"We have already put up a notice outside our restaurant informing our guests that the GST rate is down and we look forward to passing on the benefit to them" said Mahesh Karkera, owner of popular eatery Mahesh Lunch Home in the Fort area in South Mumbai.

"I fall in the category of common man and so it does make a difference to me when it comes to eating out. From 18 percent, if they are reducing it to five percent, it will certainly make a difference on when to go out for a get-together," said Judith Monteiro, a resident of Dadar.

However, Ankit Chona, MD, Havmor said, "While the FM has said that the tax will be reduced from Wednesday, there is no government notification in this regard. The proposed 5% GST is without Input Tax Credit (ITC), which defeats the very purpose of GST. We would have preferred a 12% GST with ITC. Without ITC we will not get tax paid on buying of materials. For example we by In-house ice cream where GST is 18% but we will not get ITC. We will have to charge 5% on the selling amount. Government's argument that restaurant players are not passing the tax benefit would not hold true in longer run as those not becoming competitive will lose, as this sector is extremely competitive."