According to various reports and statistics of national restaurant association the food service industry is estimated to grow rupees 4, 08,040 crores by 2018 which is currently at Rupees 2, 47,680. 11% growth rate of the restaurant industry is estimated. The growth of food industry is raising mainly due to the middle class. There is no wonder if we have to wait outside a café or restaurant on weekends as the rapid growth of food industry is due to acceptance of western culture, a large group of women working, huge improvement in urbanization and most importantly high disposal of income.
If observed above one can easily make out the numbers are really excellent for the food industry in the days rolling out with GST.
How to understand your restaurant bill with GST?
As a consumer, we are hardly aware of the components of our restaurant bill or we are ignorant about it. Anyway, but if you look at the bill from the fine-dine restaurant before the implementation of GST you will find service charge, service tax, and VAT is been added over and above the food.
So let us first understand the constituents of a bill:
- VAT – VAT stands for value added tax and is only added to the food portion of your bill
- Service tax – to avoid unnecessary hindrance government has already distinguished between food portion and service portion and the rates thereon. Hence service tax is charged only on the service given by the restaurant.
- Service Charge – this isn’t a tax, you should not confuse it with service tax. This charge is taken by the restaurant and not by the government. This charge fetches income to the hotel while service tax is not an income but a tax that is collected and handed over to the government.
The rates applied after implementation of GST are different from what it was earlier –
Rates @12% will be charged by NON-AC roadside eateries and restaurant which also includes local home delivery food joints.
AC restaurants both that serve alcohol and those who don’t will charge tax @18% and even NON-AC food joints serving alcohol will be charged at 18%. While earlier all the restaurants had to pay 6% (60% abatement pay 40%) service tax and 14.50% VAT.
Results on the consumer.
After GST coming into force, both service tax and VAT will be subsumed into a single rate. A service charge may still have its impact on your bill. But there is nothing to worry about the consumer can save a small amount on its expenditure like if earlier your bill totaled to rupees 2651, now it would total to rupees 2596 taking 18% tax rate and 10% service charge on the gross amount of rupees 2000.
Impact on Restaurant owner.
Restaurant owner will be dancing in joy under the GST regime. Under the previous tax regime the owner of a restaurant had no option to set off or adjust the output service tax liability with input credits of VAT on consumer goods but this hindrance will be solved under GST as both the taxes will be subsumed and credit of input will be available for set off and adjustments as against the output liability without consideration in favor of goods or services. GST regime will help enhance the working capital of the owners.
Thus we can conclude on a fair note that both consumer and the restaurant owner will be beneficial. It is a win-win situation, hence under the GST regime we all can explore and rejoice new food joints and outlets in our area and make our taste buds go awww.