Eating Out to be Cheaper After GST Rate on Restaurants Slashed to 5%

The GST Council has decided to cut tax rate for restaurants to a flat 5 per cent, doing away with input tax credit. The new tax rate will be applicable to both AC and non-AC restaurants, except those in five-star hotels.

The decision was taken by the council’s at its 23rd meeting in Guwahati on Friday. Finance minister Arun Jaitley said that the move had to be taken as the restaurants were not passing ITC benefits to customers. Customers were burdened as they were being charged GST on previous rates.

Hotels with tariffs above Rs 7,500 per night and outdoor catering, however, will attract levy of 18 per cent GST with input tax credit. Earlier, non-AC restaurants came under the 12 per cent tax bracket and AC restaurants fell under the 18 per cent tax bracket. In case of five-star hotels, the charge was much higher – 28 per cent.

The GST Council also increased the threshold for the composition scheme. Under the composition scheme, traders are allowed to pay a fixed rate to avoid GST nitty-gritties. Threshold for composition scheme was raised to 1.5 crore.

West Bengal Finance Minister, Amit Mitra, said that aggregate loss of revenue due to implementation of GST was around Rs 60,000 crore for the Centre and Rs 30,000 crore for states in the last three months.