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)

GST not being charged twice over on credit card payments: Govt busts myths

Please do not recirculate such message without checking it with authority," Adhia said.

Economy news : Two days into the GST regime, Revenue Secretary Hasmukh Adhia today took to Twitter to bust "seven myths" that were doing the rounds about the new tax regime.

Adhia, the architect behind the country's largest tax reform, sought to dispel concerns that if a person makes payment of utility bills by credit cards, the he/she will be paying GST twice.

"This is completely untrue. Please do not recirculate such message without checking it with authority," Adhia said.

India ushered in the Goods and Services Tax (GST) regime on the intervening night of June 30 and July 1.

A four-tier tax slab -- 5, 12, 18 and 28 per cent -- has been decided with essential items like salt, unpacked food grains, healthcare services being kept zero rated.

People have been posting in social media pictures of receipts issued in grocery stores or eateries showing tax deductions as GST, instead of VAT/Service tax earlier.

Busting the myth that GST rates are higher than VAT, Adhia said, "It appears higher because excise duty and other taxes which were invisible earlier are now subsumed in GST and so visible now."

He reiterated that businesses can continue to do business under GST with provisional ID number and need not wait for Goods and Services Taxpayer identification number(GSTIN).

"Provisional ID will be your final GSTIN number. Start business," Adhia said.

He said that businesses need not generate all invoices on computer or internet alone. "Invoices can be generated manually also."

On the rumour that businesses which were earlier exempt will immediately need new registration before starting business now, Adhia said, "You can continue doing business and get registered within 30 days".

He said small retailers need not file invoice-wise details in their return forms and retailers will have to just file one return form as the two other forms will be auto populated by the computer.

"There is only 1 return with 3 parts, out of which first part filed by dealer and two other parts auto populated by computer," he said.

Adhia also said that internet is not needed all the time to do business under GST. The reality is internet would be needed only while filing monthly return of GST, he said.

In a statement, the finance ministry said the two days post GST rollouthas passed "without any major problems being reported" from the field offices.

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