Harsha Raj Gatty
Daijiworld Media Network - Mangaluru

Mangaluru, Nov 22: Less than a week after the cut-down of Goods and Service Tax (GST) from 18 percent to 5 percent, Daijiworld spoke to a few prominent restaurateurs in the city for a reality check on the impact of the tax review on food joints.

In its 23rd meeting at Guwahati, the GST council decided to slash the tax rate from the earlier 12 percent GST (food) in non-AC and 18 percent at its AC counterpart. "It's a welcome decision... We have never modified our base price. We will directly pass the benefits of the tax reduction to the customer. The grand value (bill amount) will decrease and it will make a complete difference to them," marketing head of BMS Hotel, Chirag Ariga said.

The city based industry players claim that the revised tax structure will be a boon to the customers and encourage their frequency to the outlets. "As of now it is very premature to assess the increase in customers’ footfall, but we are optimistic that the volume of our business will improve in coming days," manager of Hangyo Saiba, Balaraj says.

In the backdrop of displeasure expressed by finance minister Arun Jaitley that eat-outs were not passing the benefit of input tax credit (ITC) to customers, the GST council withdrew ITC. This however has left the restaurant owners miffed with the council’s decision. "We had arrived at the base price after taking into account the ITC that comes with it. But with the withdrawal of ITC, the industry will be left with no choice but to hike rates as we already run on small margins. On the other hand the reduction in GST and non-withdrawal of the ITC would have definitely helped the consumers," managing owner of Spindrift, Ashwin Rai said.

Under ITC, the restaurants could claim redemption on the tax they pay on raw materials against the tax on the food products. According to restaurant owners, ITC accounts for 3-6 percent of the gain. With its removal, the restaurants are left with eroded margin.

Even a few customers complained that the government was complicating common man's understanding of tax system by constantly meddling with it. "I don't see much difference in the price, then and now. The impact seems to be minimal. However the government’s claim that GST would simplify the tax process is baseless, as now there is utter confusion. Every now and then there are new changes with respect to GST. At this rate, people can be easily caught off-guard and taken for a ride by restaurants since there is no clarity on the rate of tax," Ganesh Kishore, a local says.

It was only recently that a Delhi resident took on to social media posting picture of two bills (pre November 15 and post the same date) issued by McDonald, claiming that the global chain of restaurants was not complying to the reduction in the GST post November 15, to which the company swiftly responded that its prices have not been changed due to increased operational cost followed by the withdrawal of ITC by the government.

Meanwhile, a few restaurant proprietors have said that while they will immediately not hike the base price, they may have to do it eventually. "We will wait for about two to three months to see the effects. It may not be necessarily due to GST, but due to the price rice in the cost of groceries and meat that has become very frequent. Eventually businesses cannot operate under loss, therefore we might have to increase the price," Kumar Alva, of Onyx Air Lounge and Kitchen says.