New Delhi, October 29, 2017

Wants floor raised to Rs.1.5-crore; moots uniform GST of 12% on eateries

Extending significant relief to eateries, a Group of State Finance Ministers (GoM) has suggested a uniform GST of 12 per cent on air-conditioned and non-air-conditioned restaurants. The current levy on AC eateries is 18 per cent. It has also recommended that restaurants enjoy input tax credit.

The panel has also mooted a higher threshold and lower tax for the composition scheme. It also felt restaurants in hotels with a tariff of Rs.7,500 a night should be taxed at the existing 18 per cent.

The GoM, which met on Sunday, finalised its recommendations, which will be taken up by the GST Council at its meeting on November 10. “Eating out should not be considered a luxury in today’s world. The distinction of AC and non-AC is hardly relevant. A higher tax should only be applicable on five-star hotels,” an official said.

Headed by Assam Finance Minister Himanta Sarma, the GoM was set up by the GST Council earlier this month to review tax rates on restaurants, the definition of turnover and inter-State sales under the composition scheme.

The GoM also comprises Bihar Deputy Chief Minister Sushil Modi, the Finance Ministers of Jammu and Kashmir and Punjab, Haseeb Drabu and Manpreet Singh Badal respectively, and the Chhattisgarh Minister of Commercial Taxes, Amar Agrawal.

Composition scheme

The GoM has recommended tweaking the composition scheme for restaurants, traders and manufacturers to make it more attractive and to lower the compliance burden.

It has suggested raising the threshold to an annual turnover of Rs.1.5 crore under the scheme, and flat tax of 1 per cent tax for all.

Currently, the threshold stands at Rs.1 crore, and restaurants pay a tax of 5 per cent, manufacturers pay 2 per cent, and traders are levied 1 per cent.

For kirana shop owners, who deal both in exempt items such as unbranded food grains and taxable items such as ghee, the GoM has suggested a two-tier rate.

Traders, who want to exclude tax-free items from their turnover for payment of GST, can pay a tax of 1 per cent. They will have to maintain account books detailing transactions. Others, who do not want to exclude tax free items, can pay tax at 0.5 per cent, said the official.

Businesses involved in inter-State sale and supplies should also be allowed entry into the composition scheme, the GoM has suggested.

The composition scheme allows small businesses to pay GST and file returns every quarter.

[The Hindu Business Line]