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GST Update: Impact Of GST On Restaurant Business.

GST is almost ready to be rolled out. Both the producers and consumers start comparing the impact of the propsed taxation system with that of the existing one. In this article we are trying to compare the impact of GST of the consumers of the restaurant business comparing it with the existing system.

First of all the various rates under the GST are produced below:

Supply of Food/drinks in restaurant not having facility of air - conditioning or central heating at any time during the year and not having licence to serve liquor.

12% with Full ITC

Supply of Food/drinks in restaurant having licence to serve liquor.

18% with full ITC

Supply of Food/drinks in restaurant having facility of air - conditioning or central heating at any time during the year.

18% with full ITC

   ITC = Input Tax Credit i.e. the tax paid at the time of purchase of inputs, input services and capital goods.

Now we see the present situation with a hypothetical example. Suppose the food bill in a AC restaurant comes to Rs. 1,000/-. At present if you are in West Bengal you have to pay 14.5% as VAT on the Bill amount and Service Tax of 15% on 40%(it is called abatement) of the bill amount excluding VAT. Therefore the total tax comes to 20.5% of the bill amount and you will end up paying Rs. 1,205/-.

Now, in GST regime, the rate of GST is 18% in AC restaurant. Therefore, you can save 2.50% in tax which will amount to Rs. 25/- for the above example. The amount may be insignificant but there is another aspect which needs to be considered under GST regime.

In GST the rate is with full ITC that means any tax paid on the inputs used or intended to be used for making an outward supply in the course or furtherance of business can be taken as input credit, which means there will be scope of reducing the cost of the business. Therefore, the cost structure of the business should be revised under GST. This will benefit both the consumers as well as the restaurant owners.

Again, restaurants with an annual turnover of less than Rs. 50 lakh will be able to avail the composition scheme under the GST regime and pay a flat tax of 5% and also they will be exempt from maintaining procedural requirement. It will be beneficial to both the consumers and the restaurant owners.

It can be concluded that eating out going to be cheaper in the GST regime than now. Finding a restaurant less than 50 Lakh annual turnover will be very much pocket - friendly.

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