EFFECT OF GST IMPLEMENTATION ON FOOD SERVICES AND RESTAURANTS

INTRODUCTION

Restaurants and Food Service Businesses in India is that the fastest-growing business. Therefore, because of the changes in tax collection framework the event of the business is being affected. Goods and Services Tax introduction has created some perplexity among the restaurant proprietors. India earlier followed indirect duties which include excise levy VAT, CVD etc. which was collected by the government and repair tax was within the hand of the central government. Eventually, it realized that this indirect system was actually a burden on taxpayers because it also collected tax on tax which is additionally referred to as the cascading effect. Thus, to eliminate such double taxation system and convey all kinds of taxes in one regime India took a serious step within the tax system by implementing GST i.e., goods and repair tax the foremost important thing for a standard man to refresh himself from his daily routine life is to possess a lunch or dinner with their loved once or to go to someplace nearby. once we mention restaurants first thought that comes in our mind is food which is additionally affected under GST e.g., frozen vegetables dry plants herbs etc. at 5% fruits and vegetable juices dry fruits at 12% items preserved by vinegar or ethanoic acid or sugar or items preserved by other mean fruit jam etc. at 18%. in earlier legal system goods with 12% to 18% tax rates be charge by only 5% showed a price hike for the last word consumers.

 

GST IMPLEMENTATION ON FOOD SERVICES AND RESTAURANTS

GST ON RESTAURANT BILL

Before GST nobody was bothered on what amount of duty is being paid by us on the restaurant bills and other consumables. But after GST most are conscious about the quantity of duty levied and paid by them on the products or services consumed because earlier, we were wont to paying duty since its inception but under GST we are adapting the change which is making us more conscious as whenever it's compared with the previous cess system.

In old cess system, the subsequent items were the forming a part of our restaurant bill

 

1. Service cess charged on service provided – 6%
2. VAT charged on the food value of bill – 14.5%
3. Earlier service fee (10%) was also added by some restaurants which were for his or her own profit and doesn't attend the govt
4. Krishi Kalyan cess
5. Swachh Bharat Cess

 

So, from the above data, we will say that before GST we ended up paying around about 20%, and more if include 10% service fee by restaurants. Service charges are voluntary for patrons and aren't banned by the govt as if the customer likes the service as a tip, he can give the service charges and may also deny for an equivalent.

 

 

EFFECT ON END USERS

Now as GST has implemented, we'll pay single duty GST (CGST and SGST) in our bills rather than other multiple duties. But at many places, we still see service charges of 10% included within the bill amount alongside GST. One should note that such tax is charged by the restaurant and not the govt, which suggests the quantity so collected from us, is directly gone to the pocket of the restaurant and not the govt. So, it's voluntary in nature.

 

Let us know it with an example.

 

BEFORE GST

Let’s assume that we had dinner in an air conditional restaurant (serving alcohol) which total amounted to Rs. 2,000. If it also adds service charges (10%) (Not the tax), our total bill becomes of 2,200. the particular duty is going to be levied on this value.

1. Food amount: 2,200.0
2. Service Tax 6%: 132.0
3. VAT 14.5%: 319.0
4. Krishi Kalyan 0.2%: 4.4
5. Swachh Bharat Cess 0.2%: 4.4

Total: 2659.8

 

AFTER GST

1. Food amount: 2,200.0
2. GST5%: 110.0

(CGST2.5% 55 & SGST2.5% 55)

Total: 2310.0

So, from the above example, we will see that we save almost Rs. 350 after implementation of GST. we will say that GST has reduced the duty burden on customers as compared to the previous legal system, so it’s a win situation for the end-users.

 

 

EFFECT ON RESTAURANTS

We as an entire realize GST acts as a deliverer despite upwards of seventeen circuitous charges and guarantees to talk for the citizens' troubles by presenting a brought together and disentangled assessment administration found out of the past muddled, coated in expense instrument. Yet, one must realize that your eatery charges the aforementioned had a heap of assessments previously, the rundown being – Value Added Tax, Administration impose, KKC (Krishi Kalyan Cess) plus, SBC (Swachh Bharat Cess). This added up to an astounding 18.5% to 20.5% general assessment (contingent upon the Rajya) over our eatery charge, which implied purchasers enjoys no relief from whichever, the administration or the eatery proprietors the latter might add on a number of his chargers, for instance, benefit charge, and additionally the duty required. This custody is clearly, wilful, one can avoid it with a touch little bit of attentiveness, of the burger joint yet has previously been routinely been waged by unconscious shoppers who trusted it to be an administrative burden. within the latest GST administration, however, the rules, now are distinctive because the assessment chunks are chosen fundamentally in sight of two general classifications i.e., aerated and cooled and non-ventilated eateries, getting a few of other sub-classifications.

The most beneficial point for the restaurant owners in GST is that the Input decrease which they're going to be ready to claim against the duty paid by them on groceries etc. purchased by them from registered manufacturers and/or dealer. Earlier tax regime wasn't providing such ITC options.

ITC mechanism and day by day reduction in GST rates by the govt is reducing the duty burden on the owners and increasing their amount of capital.

Although GST seems to be a Win-Win situation for both the buyer also because the Restaurant owner, there are still some restaurant owners who are misguiding the consumers and charging more duty on the name of GST. Therefore, there are some checkpoints which should be kept in mind while settlement of the bill.

The restaurant owners are a happier bunch within the GST era, as compared with the sooner module of the VAT regime, which didn't allow to regulate the output service liabilities against the credit of input VAT on goods consumed. With GST subsuming, both taxes, the restaurant genre can now claim the credit of input for adjusting against the output liability, ultimately strengthening their bottom line.

 

Bottom Line

The restaurant business is presently burdened with variety of taxes at each and each point- right from the acquisition of the raw materials to the sales of finished items. Multiple taxes, in turn, charged from the purchasers at the ultimate bill could also be a huge turnoff for the purchasers and plays a big role in turning them away. Multiple levels of indirect taxes at the Central Level, State Level, and extra Excise and Customs Duties give major barriers within the smooth functioning of the business.

We can see a positive impact on GST on restaurants in India because the old duty systems rates are comparatively high that the present duty rates applicable in GST on restaurants. thanks to the reduction within the duty rates eating out have now become cheaper. Government has implemented 5% rates on both AC also as Non-AC restaurants but five-star hotels still fall into the slab rate of 18%. But still, as there is more clause applicable during a different category of restaurants and hotels and everyone have their own GST duty slabs and rates a standard man has got to confine mind my things which could find yourself in paying more if the restaurant owner doesn't share the right information and misguide the buyer to earn more on the name of duty. And to avoid such misleading information consumer need to be updated for an equivalent by keeping the above points in mind.