BENGALURU: The good things of life -eating out and watching movies – are set to become expensive in Karnataka, come July, when the Goods and Services Tax (GST) regime is expected to kick in. The Lok Sabha cleared the bills on Wednesday. Family outings will get dearer, especially a meal at a standalone restaurant, as will watching a Kannada movie.
At present, restaurants pay 4% composition tax (COT) not collectable from customers, and they are liable to pay this annual tax irrespective of their turnover. In the new GST regime, restaurants with less than Rs 50 lakh annual turnover have to pay 5% COT and the rest at least 12% GST, that is to be passed on to customers.
“Food at restaurants will see a steep price hike. The tax component for customers will be increased from zero per cent to anywhere between 5% and 12%. It could even be 18% depending on the kind of restaurant where you eat,” said Veerendra N Kamat, treasurer of Bengaluru Hotels Association.
Ironically , food will become cheaper at star hotels and finedine restaurants, as the effective tax rate on food consumed there is set to come down. Now, food served at star hotels attracts 14.5% value added tax, 5.5% service tax, and 0.5% cess, and in the GST regime, these taxes would be subsumed into the single GST and the maximum rate could be 18%.
The GST council has decided to have five tax slabs – 0, 5, 12, 18 and 28% – and classification of goods and services is yet to be done. Tax experts expect all hotels with a turnover of over Rs 50 lakh to be included in the 18% slab. If they are brought under 12% slab, then eating out at star hotels and fine-diners would be much cheaper. “It is going to create a precarious situation where food gets costlier at small restaurants, and cheaper at star hotels,” said B T Manohar, chairman of the taxation committee, FKCCI.