GST: hotels, eateries overcharging you? How to get the math right

Food served at restaurants attract tax at two rates under GST - 12 per cent and 18 per cent

As consumers, we are hardly aware of the components included in the restaurant bills. Next time do check your bill to see if the proper GST or goods or services tax rate has been levied. The Central Board of Direct Taxes (CBDT) on Tuesday clarified on rates of GST for restaurants.(economy news)

Food served at restaurants attract tax at two rates under GST - 12 per cent and 18 per cent (including both CGST (Central GST) and SGST (State GST)) - depending on whether it is an AC restaurant or whether the restaurant has the licence to serve alcohol.

Understanding your restaurant bill

If you revisit your food bill from the pre-GST fine-dine experience, you’ll find Service Tax, Service Charge, VAT being added over and above the food value.

VAT: This was the tax charged on the food portion of your bill.

Service tax: This was the tax charged on the services provided by the restaurant.

Service Charge: This is a charge applied by the restaurants and not by the government. It is not mandatory to pay the service charge, as per government rules.

However, the rates under GST are vastly different than what you would find before the tax policy change. Let us look at these changed rates below.

GST Rates on Eating Out

* Non-AC roadside eateries (non-alcohol) will charge tax at 12%. This also includes your local delivery restaurants.

* AC restaurants (both those that serve alcohol and those that don’t) will charge tax at 18%

* Non-AC eateries serving alcohol will charge 18%.

* Pre-packed food: The rate of tax on a parcel of pre-packed and pre-cooked namkin sold from restaurants will attract tax at 12 per cent. Also, in case of food parcel cooked as per order, GST rates will be applicable according to service of such food in the restaurant.

* Restaurants up to an aggregate turnover of Rs 75 lakh that opt for the composition scheme will charge GST at the rate of 5 per cent.

* Potable alcohol does not come under GST.

*Upender Gupta, GST Commissioner, explained that if food bill in a restaurant is Rs 500, Rs 1,000 is the alcohol bill, then GST should be levied only on Rs 500

The tax department has reiterated that no restaurant can charge GST at 28 per cent.

The tax department has also clarified that "the actual GST incidence will be lesser due to increased availability of input tax credit." Many input credits which were hitherto not available would be available now to be utilised against GST liability, says Sandeep Sehgal, director-tax and regulatory at Ashok Maheshwary & Associates LLP. (Read more)