After chairing a marathon eight-hour meeting of the GST Council in the Capital, Jaitley said that the government has taken notice of complaints that restaurants are not passing benefits of input tax credit (ITC) to customers and this has put additional burden on those eating out.
The GST Council has “in-principle” decided to bring down the rate for air-conditioned restaurants to 12 per cent from the current rate of 18 per cent, Kerala finance minister Thomas Isaac told News18.
However, a group of ministers (GoM) will first devise the mechanism for the rate cut. The GoM will submit its report within two weeks.
Jammu and Kashmir finance minister Haseeb Drabu also confirmed that a 12% tax rate for AC restaurants with no ITC was discussed in Friday’s meeting.
Officials said that while restaurants were claiming tax credit from the government for input costs, but they were not passing it on to customers. A new rate with zero ITC is a possible alternative, they said.
Under the one-nation one-tax regime introduced by the Narendra Modi government in July this year, customers have to pay 12 per cent GST in non-AC restaurants. The tax rate for AC restaurants and those with liquor licence is 18 per cent, while five-star hotels charge 28 per cent tax.