Food industry opposes move to bring down GST to 12%

Sanjeev Sharma
Tribune News Service
New Delhi, October 25

Food industry has opposed the reported move to reduce Goods and Services Tax (GST) on air-conditioned restaurants from 18 per cent to 12 per cent without input tax credit as the industry claims that would on the contrary increase the price of food for customers.

National Restaurant Association of India (NRAI) said that this is because under the current 18 per cent tax rate, restaurants get to claim credits on the taxes they pay on various things such as processed food, rent, electricity and transportation.

However, if GST rate is brought down to 12 per cent, the absence of input tax credit would leave them unable to claim these tax rebates, resulting in an increasing in their operational costs by 7 –10 per cent.

In fact, even in the earlier tax regime, restaurants were allowed an Input Tax Credit on things such as food items, cutlery, NRAI said.

The industry body said that under GST, the taxes have increased on many of these inputs and hence disallowing Input Tax Credit will only lead to higher operational costs for restaurants, ultimately leading to a rise in price of final products for consumers.

“Under the earlier tax regime, the tax on processed food was at 5 per cent, but now under GST, this has gone up to 12 per cent. Taxes on many such inputs have gone up, so if we do not get an input tax credit, then our cost of running the restaurants will go up, leading to higher menu prices for customers,” Riyaaz Amlani, President of the National Restaurant Association of India said.

“This move could also be very confusing for customers as prices of
goods will go up despite a fall in tax rates,” NRAI said.

The GST Council had taken up the issue of whether the restaurants are passing on the input tax credit as lower costs to consumers and had decided to evaluate the matter and among the proposals is to reduce the GST rate to 12 per cent without input tax credit.

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