financial services

GST: Gamble or Good

GST: Gamble or Good

The onset of the GST regime on 1st July, 2017 was supposed to remove barriers to trade and make goods and services cheaper. But what we’ve seen so far seems to belie all faith and publicity that this news generated initially.

Drop in Hotel, Restaurant GST tax rates

Basic things like food and sanitary napkins became luxury for mango man (aam aadmi) after the implementation of this indirect tax. Under GST all goods and services are taxed at 0%, 5%, 12%, 18% and 28%. That left every Indian calculating, whether this tax has done some good for our Janta Janardhan or not. We believe the mango man took too much time to understand this taxation process, as before they settled into the situation, the government has come up with a new rule.

Well, this rule talks about GST on hotel bills…there is a stark drop in GST on hotel bills from 18% to 5%…Did that bring a smile on your face? Hold on…You must be thinking this will make your meals cheaper and tastier…You were too quick to rush to that conclusion because this change does not change the taste of your fad food.

Did Restaurant Bills drop?

If you go by what is happening across the nation you will come to believe that flavour is surely missing from your hotel bills. Soon after this rule came into being there was no change or marginal change in the hotel bills in the Capital of the Nation, Delhi. In the Garden City of Bengaluru people didn’t see any changes either, in their hotel bills. Moving on to the commercial Capital, Mumbai…People saw a difference, which left them wondering about their “Achhe Din” as the base price shot up and people had to pay more than what they were paying earlier. In the city of Nizams, Hyderabad, there was a marginal drop in the hotel bills.

You must be pondering, why there is no significant difference…Instead of churning your brains you must read this…According to the National Restaurants Association Of India(NRAI) the sharp drop in GST is welcomed by NRAI, but the government’s take on withdrawing the provisions for Input Tax Credit (ITC) will not give any relief to us…It will only burn a hole in your pocket, as according to estimates by the NRAI, the government’s decision to do away with Input Tax Credit will surely shoot up menu rates by 6-7%.

The establishments that earlier attracted a GST rate of 18% will be hit quite hard… but the Finance Minister of India Mr.Arun Jaitley had something else to say. According to him, “If the impact of the withdrawal of input tax credit is a sharp increase, they should have also reduced prices by a similar margin when GST was introduced in July. It is a fit case of anti-profiteering action.”

But, the question which still remains unanswered is, will the hoteliers and restaurant owners abide by this rule or will they find a way to inflate their profits…Well, watch this space for more on this story.

This information is provided to you in the public interest courtesy of AllIndiaITR, a product of Corwhite Solutions Private Limited.

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