Restaurant bills to attract 5% GST from November 15, no tax credit for eatery owners

The GST Council has decided that all restaurants will not attract GST at a rate of five per cent and will not be extended any input tax credit. Effectively, it will be a universal composition scheme in the restaurant sector, said Finance Minister Arun Jaitley during a press meet after the Council meet today.

The GST Council met for the 23rd time, where it approved the highest number of tax cuts ever since Goods and Services Tax (GST) was rolled out on July 1 earlier this year. As expected earlier, the all-powerful council agreed to slash GST rates on restaurant bills from 18 per cent to 5 per cent. The move came on the back of findings that the restaurant sector was not forwarding the benefits of the input tax credit (ITC) received to its consumers.

"All members felt that ITC to restaurants is not passed on customers. GST was being charged on existing rates. This was putting additional tax burden on restaurant goers. Thus we decided that restaurant industry will not get the benefit of ITC. GST rates for all restaurants will be 5 per cent from now on. Since they did not pass on the ITC benefit to customers, they will not be eligible for the benefit themselves," Jaitley said addressing press personnel earlier today.

From now on, GST will be levied at 5 per cent from standalone restaurants whereas, those combined with a hotel will cost the same. Only restaurants in starred hotels, that is who charge a tariff of Rs 7,500 or above for their rooms, will attract GST at 18 per cent. Outdoor catering will continue to be charged at 18 per cent GST and will be eligible for input tax credit.

Meanwhile, restaurant sector seems discontent with the decision. The government will be short-changed, said Rahul Singh, president of National Restaurant Association of India (NRAI).