Your Restaurant Bills Remain Same Even After GST Cut, Here's How Eateries Are Keeping Rates Up
GST on restaurants was slashed from the existing 18 per cent and capped at 5 per cent The rate cuts were to come into effect from November 15. But to the shock and surprise of many while the taxes have come down to five percent they ended up paying the same amount for the same food item. This is because the restaurant had increased the price of the food item effectively depriving the customer of any benefits of the GST cut.
When the Goods and Services Tax (GST) Council recently announced rate cuts, one of the biggest gainers were supposed to be those eating out. This was after the GST on restaurants were slashed from the existing 18 per cent and capped at 5 per cent.
BCCL
The rate cuts were to come into effect from November 15. But to the shock and surprise of many while the taxes have come down to five percent they ended up paying the same amount for the same food item when the GST was 18 per cent.
In one of the most shared posts on Twitter, users have posted two bills, one when the GST was 18 per cent and the other when it was reduced to 5 percent, but on both the bills the amount is the same.
@mcdonaldsindia GST reduced..base price increased..total bill remained same... another way of fooling people pic.twitter.com/6A4VmuhZ4y
¡ª Suman Vijayapuram (@SumanVijay) November 16, 2017
BCCL
This is because, the restaurant, in this case McDonald's had increased the price of the food item, effectively depriving the customer of any benefits of the GST cut.
After being pointed out by many users, McDonald's India responded on twitter clarifying its position.
The Government has brought down GST from 18% to 5%, but there has been a removal of Input Tax Credit.[1/3]
¡ª McDonald's India (@mcdonaldsindia) November 15, 2017
Due to this, our operating costs have gone up. However, keeping customer convenience in mind [2/3]
¡ª McDonald's India (@mcdonaldsindia) November 15, 2017
we have structured the changes in such a manner that total amount paid by the customer remains the same. [3/3]
¡ª McDonald's India (@mcdonaldsindia) November 15, 2017
Input tax credit refers to a situation where a manufacturer pays the tax on his output, he/she can deduct the tax previously paid on the input he/she purchased.
BCCL
This did not come as a total surprise as immediately after the rare cuts were announced many in the industry had expressed displeasure saying it would add to their burden.
"We welcome the reduction in tax rates. But without the benefit of input tax credit (ITC), input costs will remain high and we will have to bear the burden. We request the government to give us ITC benefit like any other business," K Syama Raju, president of South India Hotels and Restaurant Association, had said.
