Eating out may get cheaper as panel discusses GST
What's the story
The revision of tax rates under the GST could make eating out cheaper: effective tax rates in AC restaurants came down from 20.1% to 18%. The government is now considering lowering the levy even further to 12% and withdrawing input tax credit. Presently, non-AC eateries are charged 12%. The matter is being discussed by a panel led by Assam Finance Minister Himanta Biswa Sarma.
Input credit
Why did the proposal to cut GST rates come about?
The proposal came as restaurants were pocketing benefits of input credit themselves. Input credit is the relief sellers/manufacturers get in taxes paid on input. If one has to pay Rs. 1,000 taxes on sales, and Rs. 300 taxes on purchases, with input credit, they need to effectively pay Rs. 700. In case of restaurants, they were claiming input credit on taxes paid by suppliers.
Implications
If approved, how will the current tax slabs change?
If the change is implemented, there will be at least two tax slabs- 5% for restaurants with a turnover of up to Rs. 1cr which have opted for the composition scheme, and 12% for all others. Tax on restaurants in five-star and higher hotels isn't clear yet. If input credit is withdrawn, many suggest it will end GST in its purest form on restaurants.
Decision
When will a decision on the matter come?
A panel consisting state finance ministers- Haseeb Drabu (J&K), Sushil Kumar Modi (Bihar) and Manpreet Singh Badal (Punjab)- along with Chhattisgarh Commercial Taxes Minister Amar Agrawal is analyzing the proposal led by Himanta Sarma. There will be another meeting on October 29 before it is placed before the GST Council. The final decision will be announced by Union Finance Minister Arun Jaitley on November 9.
Do you know?
How can you find out the tax rates?
In July, the government launched the GST Rate Finder app, which helps users find tax rates for various products. The app, which works in offline mode too, is available on Google Play Store. You can search for products by name or even description.