Gujarat legislative assembly on Tuesday passed the Gujarat Goods and Services Tax (GST) Bill 2017, thus withdrawing the Value Added Tax (VAT). Though industry stakeholders have welcomed uniform taxation, many fear they might be brought under 18% tax slab along with the entire service industry. Reeling under the same uncertainty, restaurant owners feel that they deserve being placed under the 5% GST slab, and anything higher will force them to increase prices.
“The ideal tax slab for the industry would be 5%. We had made a representation regarding this before the government when GST was proposed,” said Narendra Somani, president, Hotel and Restaurants Association, Gujarat. “If the tax slab for restaurants is around 18% in line with the service industry, restaurant owners will end up paying higher taxes. They will be forced to pass on the burden to consumers,” he said. Restaurant owners claim that fixed costs incurred by the restaurants usually account for over 70% of their total expenditures, and therefore, irrespective of their revenues, their expenditures would increase. Elaborating on this, Ankit Chona, managing director of a city-based group of restaurants, said, “Anything beyond 12% slab under GST will impact consumption and therefore will be detrimental to the growth of the industry.””Even if restaurants end up paying higher taxes, owners cannot randomly increase prices. This affects their businesses,” Chona said.