MUMBAI: Ahead of the implementation of GST from July 1, restaurant and bar owners in Mumbai have appealed to the Centre to bring all small food establishments-restaurants, snack-bars, eateries, partly AC restaurants etc-which have an annual turnover of up to Rs 1 crore, under the 5% bracket. Currently, the 5% GST slab covers only eating establishments with a turnover of up to Rs 50 lakh, a bracket restaurateurs fear will only include small road-side tea or snack vendors.
“The 5% GST bracket for restaurants with an annual turnover limit of Rs 50 lakh should be enhanced to Rs 1 crore to bring maximum restaurants and snack joints, which cater to Mumbaikars daily, to benefit people. Under the composite tax scheme, these restaurateurs will be able to directly pay 5% tax on their turnover rather than maintaining a book of accounts,” said Adarsh Shetty, president of Ahar, an association of over 8,000 restaurants and bars in Mumbai.
“Under the Income Tax Act, there is a Presumptive Taxation Scheme in Section 44AD which states small taxpayers are not required to maintain any books of accounts if profits are 8% of sales for businesses with turnover less than Rs 2 crore per annum. This itself is enough to state the turnover limit of a composite tax system should be enhanced to benefit maximum restaurants and eateries. Higher GST rates will further burden this segment as a higher percentage of tax would be passed on to customers. Input tax credit benefit provided is negligible as around 70% of our input items do not fall under GST (foodgrains, vegetables, milk, salaries, electricity). If GST is passed on to customers, it will result in reduction of business volumes,” said Shetty.
He added the proposed GST regime does not mention partly air-conditioned food-only restaurants, neither does it specify any tax on them. He said such restaurants, 70% of which cater to the middle and lower-middle classes, will benefit if the turnover limit is enhanced to Rs 1 crore.
Restaurant owner and former Ahar secretary Sukesh Shetty said partly or fully air-conditioned restaurants in Mumbai or rather any metropolitan or coastal city were not a luxury but a necessity at a time when public transport modes like trains, buses and taxis, and even public offices have become air-conditioned.
“If the GST bracket is changed to 5%, improved business will help generate higher employment. Our industry provides maximum employment, especially to unskilled people. Hence a lower GST rate will be a win-win situation for customers, hoteliers and the government,” said Rama Thakur, owner of a restaurant in Navi Mumbai.
“The government should realise while neighbouring countries like Myanmar, Thailand, Singapore, Indonesia and others levy taxes ranging from 5-10%, we can’t afford to have such a complex and high GST. Tourists will simply skip India,” said Dilip Datwani, president, Hotel and Restaurant Association of Western India (HRAWI). Being the backbone of the tourism industry, the hospitality industry was expecting to be placed in the 5% slab, said Pradip Shetty of HRAWI.
“One of the biggest hurdles for Indian hospitality and tourism, in terms of attracting international tourists, is its uncompetitive tax structure. A country as small as Singapore receives 10.9 million tourists against 6.31 million in India. Nations like Malaysia and Thailand attracted 24.7 million and 19.09 million tourists respectively in 2014 and earned foreign exchange of $18,299 million and $26,256 million. In contrast, India managed to earn a meagre $94 million,” said Bharat Malkani, past president, HRAWI..