NEW DELHI: Eating out in air-conditioned comfort could get cheaper if a proposal to fix the goods and services tax (GST) at a flat 12 per cent on all restaurants is adopted by the GST Council. But this could also mean them losing the benefit of input tax credit.
Air-conditioned restaurants currently charge 18 per cent GST and non-air-conditioned ones charge 12 per cent GST. Unifying the rate may mean giving up the ability to claim back taxes paid on inputs.
“It has been felt that the restaurants have not passed on the benefit of input tax credit to consumers,” said a government official, who said the lower rate of 12 per cent may be extended to cover the entire sector. The GST Council had set up a panel to look into the matter.
The industry lobbied for a 12 per cent rate for all restaurants but with the benefit of input tax credit kept intact. Incidentally, restaurants with an annual turnover of up to Rs 1 crore can avail of the composition scheme — a flat 5 per cent tax without input tax credit and easier compliance requirements that’s meant to support small businesses.
Representations were made to the panel about restaurants not passing on the benefit of input tax credit while levying 18 per cent GST, the official said. After the imposition of GST on July 1, taxes on such services rose to 18 per cent from 15 per cent but the rationale was that input tax credit would neutralise the increase.
Following lobbying by the industry, the GST Council set up a panel under Assam Finance Minister Himanta Biswa Sarma to make the composition scheme more attractive and revisit GST rates on restaurants. The panel, which had been asked to give its report in two weeks, has finalised its recommendations, said the official cited above.