New Delhi, Nov 11: The customers looking to pay less at restaurants may not enjoy services at relaxed rates now after the Goods and Services Tax (GST) council decided to remove the input tax credit on Friday. The council decided to remove the credit as it believed the restaurateurs were not transferring the benefits to the customers. Input tax credit is a feature of the GST Rates under which manufacturers and service providers can deduct the tax previously paid on the goods at the time of purchase.
Other firms too objected the move of the council. Deloitte India said in a statement that a uniform tax rate of 12 per cent doing away with tax rate distinction between AC and non AC restaurants is welcome, but the critical issue of input tax credit eligibility cannot be ignored.
The restaurants are expected to increase the prices after the tax rates of many goods were relaxed. A uniform 5 per cent tax was prescribed for all restaurants, both air-conditioned and non-air conditioned. Presently, 12 per cent GST on food bill is levied in non-AC restaurants and 18 per cent in air-conditioned ones. The changes will be effective from November 15.
Restaurants in starred-hotels charging Rs 7,500 or more per day room tariff will be levied 18 per cent GST but ITC is allowed for them. Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 per cent GST but will not get ITC.
The all-powerful GST Council pruned the list of items in the top 28 per cent Goods and Services Tax (GST) slab to just 50 from current 228. So, only luxury and sins goods are now only in highest tax bracket and items of daily use are shifted to 18 per cent.
(With inputs from agencies)