GST on restaurants 5% or 18% or both? There’s one clause about eating out you must know

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It’s been nine months since the Goods and Services Council (GST) Council brought down tax rate on restaurants/eateries to 5% irrespective of the fact whether a place air air-conditioned or not. However, there’s one clause that can make you pay 18% tax on eating out.

The GST Council left no ambiguity in making a distinction that if a restaurant or eatery is located within the premises of a hotel, inns, guest house, club, or any commercial place meant for residential or lodging purposes with a daily tariff of Rs 7,500 per day per unit or above, the tax will be 18%.

Recently, Delhi-based India Habitat Center put up a notice clarifying that it was levying 18% GST on its restaurant services because it also provided room services above Rs 7,500.

Legal expert L Badri Narayanan of Lakshmikumaran & Sridharan Attorneys told FE Online that the GST Council made it clear that eating out tax rates cannot vary for in-house customers or outside customers. Only if a restaurant is not located in the same premise with lodging services above Rs 7,500, the GST rate would be 5%.

The GST regime has been criticised for having too many tax slabs making it complicated for consumers to understand. Recently, after a lot of representation from the hotel and restaurants stakeholders, the GST Council that the tax on accommodation service will be chargeable on ‘transaction value’, rather than the ‘declared tariff’.

Earlier too, a lot of confused was reported when two different slabs were levied on restaurant services — 12% for non-airconditioned ones and 18% for airconditioned ones. Eventually, the GST Council decided to strike down the distinction by levying 5% tax with the claim of Input Tax Credit (ITC) in November 2017.

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