For eateries, GST a ruse to raise prices

Unhappy customers look at changing consumption patterns; restaurants complain of dip in sales

July 22, 2017 12:53 am | Updated 01:36 pm IST - Chennai

Eating out has become a costly affair for consumers across the State after the Goods and Services Tax (GST) came into force. While the additional 18% that is loaded on to the bills is proving to be a burden, it has also become clear that some hotels and restaurants have hiked the base price of food compared to pre-GST rates.

The price hike may have already had an impact. Hotels and restaurants say they are seeing 10-20% fewer customers depending on the location.

Fewer eating out

The manager of a vegetarian restaurant that has more than 20 branches in Chennai said that footfalls have dipped by 15%. But customers who frequented the hotel said that with GST, the cost of eating there has gone up. “₹240 for a meal is quite high when compared to ₹180 earlier,” Ms. P. Kamala, a businesswoman. 25-year-old Arun Kumar, a techie who works in OMR, usually has his lunch and dinner outside. “Before GST, my food budget per week was ₹1,500. Now I spend close to ₹2,000. So, I found a cook who is charging me ₹1,500 a month,” he said.

A restaurant in T. Nagar, which charged ₹140 for a plate of chicken biryani, has hiked it by ₹30, said S. Ashwin, a techie. He added that a popular frankie shop in the city, which has its outlets outside supermarkets, has increased the price by ₹5-7 but when asked for a bill the salesmen at the counter say that no bill is given by this outlet. “If you look at the menu card, it clearly says that price increased due to GST but when there is no bill, I wonder where the money goes,” said Mr. Ashwin. Some small tea shops that do not come under GST have increased the price of a cup of tea by ₹1.

M. Ravi, president, Tamil Nadu Hotel Association, said that hotels have not increased prices and they have witnessed a huge dip in footfalls. “Our businesses have been hit since demonetisation when we saw a 30% dip in business and now GST had added to our woes,” he said. He also claimed that it’s just customer perception that prices have increased because they see the GST component on the bill. “Why would we hike the prices and send away customers? We want people to come and eat,” he said. According to Mr. Ravi, when compared to other States, eating out is relatively cheap in Tamil Nadu. “A few hotels might have hiked prices just to round off the amount For instance, if the bill post-GST was ₹28 they might have rounded it off to ₹30. That is not a big hike in price,” Mr. Ravi said.

Under GST, air-conditioned restaurants will charge 18% tax and non-air-conditioned places will attract 12% tax. Earlier, there was Value Added Tax (VAT), service tax, cess and service charge.

K. Prakash, who serves breakfast, lunch, and dinner to about 200 customers every day, is yet to add the GST component to his bills. His 20-year-old eatery, Blue Paradise, located near VOC Park in Coimbatore, sells 30 parcels per day. He said, “After the implementation of GST, we have got 30-40 new customers and the first question they ask is whether we charge GST.” None of his suppliers have increased the rates. Hence, there is no hike in the input costs so far. “We are talking to our auditor. We will register for GST soon and then work out the rates,” he added.

In Madurai, Ravi, owner of Krishna Residency, said his hotel saw a 40% dip in sales. “We charge ₹60 for a plate of parotta which was ₹40 a month ago. Even regular customers are not turning up,” he said.

Gomathi, a homemaker, who lives in Singarayar Colony, Madurai, said that female students residing in private hostels have approached her to buy food. Ms. Gomathi prepares variety rice at home. “Earlier, I used to cook for 30 people per day. Now, the numbers have increased,” she said.

In Tiruchi, both hotels and roadside eateries have taken a beating despite not changing their rate cards. “Until a month ago, we did business to the tune of ₹10, 000 per day. Now, we make 50% of what we made earlier,” said M. Sudershan, an employee of a road side shop at No. 1 Tollgate.

Cutting profit margins

Small hotels in Thoothukudi are making a bid to retain customers by cutting their profit margins. In Virudhunagar, hotels have not hiked prices. In Ramanathapuram, hoteliers are yet to implement GST.

“They are waiting for revision of rates and will implement the new rates from August 1,” said, P. Venkatasubbu, secretary of Ramanathapuram District Hotels, Bakeries and Tea stall owners association. Tamil Nadu has more than one lakh registered hotels and restaurants and several lakhs of unregistered restaurants.

( With inputs from D.J. Walter Scott in Ramanathapuram, K. Raju in Dindigul, L. Srikrishna in Thoothukudi, S. Sundar in Virudhunagar, Sanjana Ganesh in Madurai, C. Jaisankar in Tiruchi and M. Soundariya Preetha in Coimbatore)

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