Narendra Modi government on Friday decided to fix the Goods and Services Tax (GST) rate at 5 percent for all restaurants and not give them input tax credit. It also decided that restaurants in starred-hotels will charge 18 pc tax with input tax credit, those in lower category hotels to charge 5 pc GST without ITC.
As many as 178 items of daily use were shifted from the top tax bracket of 28 percent to 18 percent, while a uniform 5 percent tax was prescribed for all restaurants, both air-conditioned and non-AC, Finance Minister Arun Jaitley confirmed after the GST Council meeting.
Currently, 12 percent GST on food bill is levied in non-AC restaurants and 18 percent in air-conditioned ones. All these got input tax credit, a facility to set off tax paid on inputs with final tax.
Jaitley said the restaurants, however, did not pass on the input tax credit (ITC) to customers and so the ITC facility is being withdrawn and a uniform 5 percent tax is levied on all restaurants without the distinction of AC or non-AC.
Restaurants in starred-hotels that charge 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 percent GST but will not get ITC.