There is an air of disquiet among restaurant owners in the city about the three tax slabs mandated under the Goods and Services Tax, which will be rolled out from July 1.
“Hospitality industry is part of tourism. You cannot stifle hotel industry by levying high tax and expect tourists to come to the country. Ours is not a very big restaurant nor is it a small one. Most restaurants have AC nowadays. Once these are moved to 18% bracket, we will be priced out of competition,” says Bosco Malapatti of Ofen Bakery at Banjara Hills.
The prevailing tax rates have two brackets with 5% VAT for those with a turnover under ₹1.5 crore a month, and 14.5 % VAT for those above ₹1.5 crore business per month. Under the GST, there will be three tax slabs: 12% for restaurants without AC and not serving liquor, 18% bracket for restaurants with AC, and 28% bracket for restaurants in 5-star hotels. Hotels with room rates above ₹5,000 attract 28% tax under the new tax regime, while earlier it was 19% inclusive of VAT, luxury tax and service tax.
“We are planning to go on a strike. Already, mobile food carts have taken away a chunk of our business. In addition to the higher rate, we will have to file returns every 10 days. All hoteliers will have to employ a full-time auditor for this,” says S. Venkat Reddy, president of Telangana State Hotels’ Association, an industry body in the State. “Roadside food stalls and mobile vehicles can provide cheap food as they don’t have to worry about hygiene, use non-commercial cooking gas, or pay electricity bills. Now the price gap will widen and small and medium hoteliers will be pushed out of business. It will affect employment as well,” says Mr. Reddy.
“This new tax regime will kill the industry with steep rates. AC is no longer a luxury, it is a necessity. Can you imagine a restaurant in any city without AC? Does the government want us to set up dhabas in cities?” asked another restaurant owner not willing to go on record.
“Our customers will benefit as we will benefit from lower tax of 18%. Till now, we were paying 14.5% VAT and 5.6% service tax. In addition, we had to file returns at two places. Now we will have to file only one return. The customers will benefit due to this and we will have less of a hassle while filing returns,” says Ravi Raju of Vivaha Bhojanambu restaurant at Jubilee Hills.
