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GST effect: Be ready for confusion, disputes at restaurants from July 1

BT Online     June 26, 2017

Don't be surprised if the roll out of GST next month leads to minor disputes at restaurants and hotels from July 1 as different rates for these services could cause confusion among customers and shop owners. The GST Council has fixed multiple rates for restaurant services based on different variables - AC or non-AC, turnover amount, luxury category.

Those restaurants that have a turnover of less than Rs 50 lakh are placed in the 5 per cent rate basket. Restaurants that have a higher turnover than Rs 50 lakh, but do not have an ACs, will have to pay 12 per cent  GST.

Making it even more complicated, those restaurants that offer AC facilities to its customers, will be charged 18 per cent GST. The different criteria on the basis of which the GST rates have been fixed for restaurants seems to be indicative of the government's intent to tax the rich. However, it remains debatable if ACs in restaurants should be a yardstick for this.

The GST rates increase further to 28 per cent for luxury restaurants or the ones in the five-star hotels. So, what does it really mean for consumers?

If you love street food sold at small neighbourhood eateries and local market stores, you would be paying less as the GST on these food joints (assuming they are non-ac restaurants) would be just 5 per cent.

But, if you decide to walk into a fast food stores (e.g: pizza shops, confectionaries, ice cream parlours, etc) which have AC facilities, your bill could be higher since here the GST rates would be 12 per cent.

And, if you want to have a really luxurious meal at a fancy five-star restaurant, you will be paying more tax. The tax rates here  will be 28 per cent. It's somewhat fine up till here for consumer. It gets complex when you imagine restaurants that have sitting arrangements both indoors and outdoors.

Will you be charged less for sitting on a garden or a rooftop than you will be charged for sitting inside the restaurant and enjoy the air conditioner? There's no clarity. However, if common sense prevails, one would imagine that high-end restaurants with AC facilities regardless of whether the customer sits indoors or outdoors would be charged the higher GST rate.

But that does not mean there won't be confusion. Many restaurant owners may find it difficult to explain the complex tax structure to customers who are not well informed about the issue.


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