Already reeling under the effect of demonetization, Highway Liquor Ban, and the entire Service Charge predicament, the Restaurant Industry suffered yet another blow in the form of the new GST rates, announced by Finance Minister Arun Jaitley. Restaurants and hotels will now be charged at Tax rates based on their turnover and whether the establishment is AC or non-AC. Read in detail the impact of GST on the restaurant business here.
How the New GST Rates Impact the Restaurants
Under the new GST rates, Non-AC restaurants will be charged at 12%, while AC restaurants will be charged at 18%. 5-Star restaurants will be charged a Luxury Tax of a whopping 28%. Restaurants with a turnover less than 50 lakh INR heave a sigh of relief, as they would be levied a GST rate of 5%.
Hotels and lodges having tariff less than 1000 INR will be taxed at 5%, while those between 1000-2500 will be charged at 12%. Hotels between 2500-5000 will be charged at 18%, and hotels having tariff above 5000 will be considered luxury hotels and charged at 28%.
Considering that a majority of the food businesses and restaurant outlets fall under the unorganized sector still, the new GST rates are expected to work for the betterment of the small restaurants and encourage business. However, the industry experts are calling it a myopic move, and that it would spell doom for the overall hospitality business.
Riyaz Amlani, president of NRAI (National Restaurant Association of India) also expressed his cynicism that heavy taxation and regulations would result in the ‘leakage’ in revenues and that restaurants and hotels should be given impetus as they provide a lot of jobs and are critical for tourism to grow.
Note: According to the recent ruling by the government, both AC and Non-AC restaurants will be levied a GST tax of 5%. The restaurants in 5-star hotels that charge Rs 7500 per day will be levied 18% GST. Read how the new GST rates will impact the restaurant industry here.