GST Rate on food and beverages: Assigning GST rates for hotels and restaurants against annual turnovers is a progressive move by the authorities. One of the major benefits of GST to the hospitality and tourism sector is that it will eliminate multiple taxation by subsuming all taxes previously levied under one single entity. The promise of ‘one nation, one tax’ will also increase the ease of doing business in the country with the provision of standardized tax rates and flexible criteria to avail input tax credit.
The rates in the overall hospitality sector, however, have a complex classification and are on the higher end. Since inception the rate applicable for Hospitability and restaurant services is as follows:
GST Rate on food and beverages
- All stand-alone restaurants irrespective of air conditioned or otherwise, will attract 5% without ITC. Food parcels (or takeaways) will also attract 5% GST without ITC.
- Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day will attract GST of 5% without ITC.
- Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) will attract GST of 18% with full ITC.
The GST rates for non-AC restaurants are 12% on food, while AC restaurants and those with liquor licence, including restaurants in five-star hotels will be levied with 18% GST. Hotels with room tariffs between Rs. 2,500 and Rs. 7,500 will be charged 18% tax while those with daily tariffs above Rs. 7,500 will be levied a GST of 28%. However, the GST Council have after listening to a number of representation from the Industry, agreed to reduce the rate of services in restaurant at 5%. A detailed study is given towards end of this article.
Dining out will turn cheaper after GST council entered into the issue with the GST Council slashing the tax on restaurant bills. A uniform 5% tax will be levied for all restaurants, both airconditioned and non-AC made a big relief to the common people. Earlier a 12% GST on the food bill is levied in non-AC restaurants and 18% in air-conditioned ones.
All these restaurants were also given an input tax credit benefit, a facility which sets off tax paid on inputs against the final tax to be paid by consumers. These restaurants, however, did not pass on the input tax credit (ITC) benefit to customers and continued to charge the 12 or 18% GST.
Therefore, the ITC facility is being withdrawn and a uniform 5% tax is levied on all restaurants without the distinction of AC or non-AC, the finance minister explained. Restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18% GST but ITC is allowed for them.
Must Read: GST Rate on Hotel Rooms
Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 % GST but will not get ITC, The Federation of Hotel and Restaurant Associations of India (FHRAI) on Friday said GST Council’s decision to cut tax rate for restaurants to 5% without input tax credit will help restaurants across India rationalise tariffs.
Welcoming the move by the council, the apex industry body said it had sought bringing down GST rate on restaurants to 12% with input tax credit or at 5% without input tax credit. This decision of the council was a certainly historic. The very concept of Input Tax Credit (ITC) is central to GST which is to prevent cascading of taxes.”
The top tax rate is now restricted to luxury and demerit goods like pan masala, aerated water and beverages, cigars and cigarettes, tobacco products, cement, paints, perfumes, ACs, dish washing machine, washing machine, refrigerators, vacuum cleaners, cars and two-wheelers, aircraft and yacht.
There is good news for budget conscious travellers as small and budget hotels with daily room tariffs of Rs. 1,000 will be exempt from the GST schedule, while those charging up to Rs. 2,500 per day will pay 12. Allotting a lower tax bracket to small restaurants and budget hotels will help them grow and enable them to enhance their service quality and standards on a regular basis. Currently, low to medium budget hotels constitute nearly 80% of India’s hospitality market, so a low tax burden on these hotels will also help create thousands of new jobs.
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