Several Indian restaurant startups namely, Chaayos, Social, Smoke House Deli, and Wow Momos are planning on raising the cost of meals in response to the Government’s decision of reducing the GST rate from the present 18% to 12%. These restaurants are claiming that the food bills will increase by 10% since they will not receive the benefit of Input Tax Credit (ITC).
“Under the earlier tax regime, the tax on processed food was at 5 percent but now under GST, this has gone up to 12 percent. Taxes on many such inputs have gone up, so if we do not get an input credit, then the cost of running the restaurants will go up, leading to higher menu prices for customers,” said Riyaaz Amlani, CEO of Impresario Entertainment & Hospitality Pvt Ltd.
Under the present tax rate, restaurants can claim on various taxes such as processed food, rent, electricity, and transportation. However, restaurants were charging customers 18% GST and claiming ITC as well. This practice forced the Government to lower the GST rate and cut back on ITC.
“GST at 12 percent without ITC is detrimental for the industry and the consumer. Not only will it increase the cost for restaurant operators, it will also encourage the industry to work with unregistered suppliers. Removal of Input Tax Credit (ITC) will increase the cost for the customer,” said Nitin Saluja, co-founder of tea cafe chain Chaayos.