GST rollback unlikely to make dining cheaper

Hyderabad: With the Centre slashing GST on hotels and restaurants to five per cent on AC and non-AC alike, will the benefit be passed onto the consumers? Prompt answer from industry insiders is a big ‘No.’ A Rs100 bill at an AC restaurant under previous GST would have cost consumers Rs 118. It will be Rs 105 now. So, will the Rs 13 benefit of difference be passed on to consumers.

The benefit tax cut is unlikely to be passed onto consumers as margins-deprived hotel industry doesn’t seem to be inclined to pass on the 7-13% tax relief to consumers as the GST Council didn’t extend input tax credit (ITC), while slashing tax rate.

When GST was rolled out on July 1, 2017, the Centre imposed 12 per cent on non-AC and 18 per cent on AC restaurants and hotels. These rates were with input tax credit facility. However, hotels regardless of their size of operations, increased menu rates by over 20 per cent. Now, GST rate has been slashed down to uniform 5 per cent. Consumers keep their fingers crossed over whether menu rates will also be lowered.

However, hotel industry insiders, on a condition of anonymity, said that “our margins are hard-pressed already and hotels are reeling under pressure. At this juncture, we can’t afford to reduce our menu rates because of GST rate cut. Moreover, the input tax credit is not available now.

This means, we’ll have to absorb that cost. So, how can hotels or restaurants afford to lower menu rates?” Ruling out this as speculative, Telangana State Hotels Association and Hyderabad Hotels Association are assuring of passing on tax benefit to consumers.

S Venkat Reddy, President, Telangana State Hotels Association, said: “Consumers will be benefited. Because of higher GST, hotel business volume was down by almost 30 per cent.

Unless consumers get benefited, business can’t grow. I am confident that large number of consumers will visit hotels more often. We expect a speedy recovery in business volume.” Pre-GST, there were 5 per cent VAT and 6 per cent central service tax on hotels/ restaurants.

For over Rs1.5-cr turnover, 14 per cent VAT and central service tax remained at 6 per cent. Before GST, total tax load was 11 per cent for those below Rs1.5 cr turnover and 20 per cent for over Rs1.5cr business volume.

Kancharla Ashok Reddy, President, Hyderabad Hotels Association, adds: “We’ll take up a campaign on passing on tax benefit to consumers. Small hotels will flourish on lower tax rate. Roadside dhabas will also get benefited under GST. There’s over 18,000 hotels, restaurants, bakeries, food outlets across twin cities.

The slashing rate will benefit all. We had been fighting for star and non-star-based tax system, but not AC and non-AC.” While thanking the Centre and Telangana CM K Chandrashekhar Rao, Venkat Reddy said that Association will felicitate Telangana Finance Minister Etela Rajender on November 17.

Reddy urged the state government to curtain official harassment on hoteliers as they without showing ID cards, raiding restaurants and throwing food items on road. “Most of the cases, it’s on personal motive. Such ridicule acts damage goodwill of restaurants,” said Reddy.

By Sreenivasa Rao Dasari