Taxes feel like a never ending maze of legal and mathematical terms and yet most people aren’t aware of what and how much tax they are paying while buying a product or a service. To overcome these confusions and the flurry of different taxes imposed on the general public, the Indian government has decided to adopt the policy of ‘one-nation-one tax’ and have come forward with the ‘Goods and Services Tax’ or GST which will charge only a single tax on all consumers and save them from all the other direct or indirect taxes.
The list of taxes in India is a big fat one and not everyone knows what and how much they are paying for the goods and services they buy. Today, consumers pay a tax on the total amount of the goods and services, which include:
- The cost of the raw material
- Tax on raw material
- The value added by the manufacturer
- Tax paid by the manufacturer
- Retailer’s margin of selling the good
Now if the GST is implied, the manufacturer will have to pay the GST on the value added by them and the consumer will have to pay the tax only on the retailer’s margin. It is being hoped that the GST will help the consumer understand the tax implications while easing out the tax process for the retailers and manufacturers.
Find out how to get the GST registration done for your restaurant here.
The GST is a big boon to big traders of the organized sector as they will get a single market to buy raw materials from any part of the country as the tax will remain the same.
It is possible that the cost of these services will increase significantly once this bill is executed. As of now, this service industry implies 15% taxes, which may increase to over 18% depending on the GST council’s decision which will make air travel, restaurant bills, and hotel stays costlier. The GST is sure to help restaurants purchase raw materials at a cheaper rate; a shoot up in prices due to a different tax regime might unsettle things a bit in the wrong way for the restaurant owners as the customers might frequent their visits to eating joints due to high taxes.
A four-tier GST rate structure was decided where the taxes are levied at multiple levels, ranging from 5% to 28%. As per the new GST rates, five-star hotels and restaurants will be charged at 28%. Non-AC restaurants would be charged at 12%, while AC establishments would be charged at 18%.
The new GST rate structure spells good news for the small restaurants and would have a positive impact on the Cloud-kitchens and food delivery businesses as they would be charged significantly less than the AC food establishments and high-end restaurants.
Overall, the GST Bill is expected to bring in better processes and operations, by ensuring more transparency in business. The reduced tax levied on the small restaurants would also propel customers to spend more.
Read a detailed article about the GST Bill and how it would impact the restaurant business here.