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Goods and Services tax in India has several advantages and disadvantages. The impact of GST can be seen on every sector. Even the restaurants, hotels and other related industries are not exempted from the GST impact. According to the sources, the hotel and restaurant industry is presently loaded with swarm of taxes right from the advent of purchasing raw material to the final dish on your plate. Diversified taxes on customer's bill will definitely off-ramp a lot of foodies who loves to dine out frequently and try different cuisines. As a matter of fact, foodies who do not think while experimenting with food will start giving feeble thoughts like 'to order or not to order'.

Here's how dining out have been affected after the GST roll out.


The former taxation system was an amalgamation of numerous taxes charged as Service tax and VAT on food items and beverages served at restaurants and hotels which probably makes up to a charge of 20.5% of tax. These hefty amounts of price were extracted from the pocket of those customers who visit restaurants for a date night with their partners or dine out with their family.

However, the implementation of GST on the hotel industry have eradicated the plethora of taxes. Hence, reducing the total cost for the end user. The procedure of GST enactment have categorised food items and beverages as supply of services. Implementation of GST has reduced almost 3% of the taxes including service tax and VAT into one single GST tax of 18%. However, the additional load of dinning out in a luxurious 5 star hotel will cost you a GST rate of 28%.

Therefore, fill your pocket with enough amount to wine and dine at such hotels. It is because according to the GST bill latest news on hotel businesses the tax have been doubled up to a GST rate of 18% for luxurious hotels.

Restaurant Owners

While customers are losing their hard-earned money to wine and dine in a better place, there must be someone who is gaining the profit? Restaurant owners are the one who have a purpose to celebrate the GST roll-out as the profit funnel is directed into their pockets. The new taxation system on on-roll hotels and restaurants, the owners will have a choice to claim input credit against the productive liability. It is because under the GST regime, VAT and service tax have been subsumed. As a result, restaurants are optimising their working capital efficiently such as service quality, clarity with customers and administrative comfort.

On Procurement of Capital Goods

Formerly, the tax rates for capital goods were obtained at a VAT of 14.5%. However, under the GST regime this rate has risen up to 18% leading to an upsurge in cost. According to the GST bill latest news, the high prices of capital goods have painted a gray picture for brand new restaurants and food production industries that have to invest huge expenditure on kitchen equipment or other capital merchandises.

On Purchase of Raw Materials

GST, on the other hand, have excluded the raw materials from the taxation regime. The restaurant food cost have been exempted from GST as agricultural products which is obtained straight out of the farm is relieved from VAT and will not be charged with GST in distant future. According to the former taxation system, the semi-purchased food products were charged5% VAT whereas the price remains same for such products under the GST.

On Liquor

Alcohol consumed by human is basically imported from external suppliers and falls under the category of State Tax and Excise. That's the reason, liquor is kept out from the GST regime in India. Therefore, the State-wise VAT and Excise Duty is applicable as the previous tax rates and system for liquor will continue to prevail. On the GST line of taxing items, the price of liquor is likely to fire-up.

On Sparkling Drinks

The tax rate for aerated or sparkling drinks is on top, i.e. 28% under the GST rate. In the previous taxation system, the cost used to come in between 20.5% to 26%.

The Final Word

As a result, the hotel industries and restaurants are going through the abuzz after the new taxation regime. Things are going to settle down only when there will be proper understanding of the new taxation system which might be time-taking. On the other hand, GST has already begun to show its impact of all the food lovers who dine out frequently.


Published by

(Financial Advisor)
Category GST   Report

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