Come GST, eating out will pinch your pocket

Come GST, eating out will pinch your pocket

 Eating out will burn a hole in your pocket once the Goods and Services Tax (GST) is rolled out on July 1.

The Union government has brought hotels and restaurants under the service category. It has divided service category into two - those with a turnover of less than Rs 50 lakh and those whose turnover exceeds Rs 50 lakh.

“Restaurants with a turnover of less than Rs 50 lakh will charge customers 5% composite tax while the remaining will have a blanket 18% GST,” said Veerendra N Kamat, treasurer of Bruhat Bengaluru Hotels Association (BBHA).

Though the GST will bring all restaurants under one umbrella and stop thriving illegal (unregistered) hotels, it will push up the price of food at restaurants. For instance, at present, a customer has to pay 14.5% VAT and 6% service tax (totaling 20.5%) at a finedine restaurant and this would come down to 18% . But, service hotels (with AC) which hitherto charged 4% composite tax and 6% service tax, will now charge 18% GST, he explained. Apart from this, restaurants will also be at liberty to collect service charge from customers.

There are 200 star hotels in Karnataka of which over 150 are in Bengaluru alone. Similarly, Bengaluru has around 12,000 standalone restaurants out of 60,000 in Karnataka. Apart from this, there are over 3,000 unregistered restaurants in the city. The restaurants are classified as finedine, service with AC, service without AC and darshinis.

Subramanya Holla S, BBHA secretary, pointed that though liquor is a state subject, pubs, bars and restaurants will also fall under the GST category, making it more expensive for pubgoers too. Around 25% of Bengalureans are dependant on restaurants for meals every day. This section of people will be badly affected.

In addition, caterers and wedding organisers too will charge the hefty GST, Holla added.
Worried about losing their customers, representatives of state and city hotels and restaurant associations of all south Indian states held a meeting with officers of the Union government, recently. They submitted a memorandum pointing out that this aspect of GST would burden the customers, especially the middle class. This will also reduce the business volume for restaurants which will directly affect many jobs. “The officials promised us to look into the matter,” Kamat added.

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