Hospitality industry welcomes GST rate cut; ITC denial remains a problem

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The hospitality industry in India has welcomed the recent reduction of GST rate to five per cent for all restaurants. Now irrespective of whether the restaurant is air conditioned or not, the consumer will have to pay a uniform GST rate of five per cent. Industry body Hotel and Restaurant Association of Western India (HRAWI) has said this is a big boost for the industry which has been reeling under a slowdown for quite sometime. “However, denying the ITC benefit on the grounds that we have not been passing on benefits is unfair. There has not been any reduction of prices in raw materials for us. In fact, post introduction of GST, the costs of operations and raw materials have actually gone up. The move to remove ITC amounts to double taxation and is inflationary,” said Dilip Datwani, president, HRAWI.

In a similar development, Central Board of Excise and Customs (CBEC) chairperson Vanaja Sarna had written to FMCG companies asking them to immediately revise MRP on all products in line with the latest reduction in GST rates. The GST rate was also reduced on 178 items from 28 per cent to 18 per cent from November 15. In her letter to all the major FMCG companies, Sarna pointed out the need to immediately revise the maximum retail price (MRP) on all the products for which the tax reductions have been announced by the GST Council.

“The reduction in GST rate is certainly a welcome move. We appreciate the reduction in cost of eating out for the consumer but while doing so, the government has put us in a tight spot by withdrawing the ITC. So while we are happy to know that the reduction in GST will help increase the footfalls in restaurants, conducting business in the absence of ITC may not remain viable for all hoteliers. Without ITC restaurants will have to bear the implication of tax costs of operations, goods and services which is far more damaging to a business from a sustainability perspective. We would have hoped that there was a single tax structure instead of the multiple slabs and that the ITC was maintained,” said Rishi Puri, vice president, Lords Hotels & Resorts.

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