Previously, a service tax was levied on the bill. But the tax the hotel or restaurant operators paid on inputs could not be set off against the tax on final bill. This facility, called input tax credit (ITC), is available in the Goods and Services Tax (GST) regime.
"Most of the restaurants should revise downward the rate charged on food items in their menu because of ITC which is now available. So ITC should be accounted for now in form of reduction in the value of supplies which they are giving," Adhia said in GST Master Class.
Under the GST regime, while non-airconditioned restaurants attract 12 per cent tax, AC restaurants and those serving liquor will attract 18 per cent. Adhia further said that anything that is served as part
of restaurant bill will be subject to GST, barring alcohol on which Value Added Tax (VAT) will be levied.
"On the entire value of food bill, including service charge, on that portion also GST will apply," he said.
"There are a lot of representations on this about transition for lease service industry. We are looking at the representation but we are not sure how to handle this," Adhia said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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