McDonald's Meals Not Cheaper Despite GST Rate Cut. Twitter Not Lovin' It

The tax rate for restaurants was revised downwards to a uniform 5% from the earlier 12% for non-air conditioned restaurants and 18% for air-conditioned restaurants.

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McDonald's Meals Not Cheaper Despite GST Rate Cut. Twitter Not Lovin' It

Comparison of a McDonald's bill before and after last week's GST rate cut

New Delhi:  In a move set to make eating out lighter on customers' pockets, the GST (Goods and Services Tax) council slashed the tax rate for restaurants last week. The tax rate for restaurants was revised downwards to a uniform 5% from the earlier 12% for non-air conditioned restaurants and 18% for air-conditioned restaurants. But restaurants won't get the benefit of input tax credit, a facility to set off tax paid on inputs with final tax. The tax cut was part of the biggest change to GST rates since July 1. Apart from restaurants, tax rates for 200 items were also slashed.

When the new rates came into effect yesterday, consumers were hoping to see their restaurants bill be considerably lower after companies said they will pass on the rate cut to the customers. But many astonished consumers lashed out at restaurants when they found their food bills didn't drop as drastically as they expected them to.

Angry customers on Twitter lashed out at fast food chains McDonald's and Starbucks along with pictures of food bills before and after last week's GST cut. Many pointed out that McDonald's has actually increased the MRPs (Maximum Retail Price) after the rate cut making the total bill nearly the same. Some even tagged the Finance Ministry in their tweets.
 
 
Trying to pacify angry customers, McDonald's India clarified that despite the GST rate cut, their costs have actually gone up as government removed Input Tax Credit. Restaurants earlier got input tax benefit on rent, food and other items which helped them to reduce cost. The company added that they have revised the bill structure in a way that the total amount paid by the customer remains the same.

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"We believe in giving the best value to our customers, and have passed on the benefits wherever we could. We have substantially reduced the prices of some of our flagship products," the company added in a statement to NDTV.
 
Most were not convinced with that argument
 
Starbucks told NDTV that they too factored in the removal of the input tax credit to not reduce the overall prices. "Tata Starbucks complies with all the local laws and regulations. Following the recent revision in the Goods and Services Tax (GST) structure, we have ensured savings for our customers on every product. The rollout of the change in GST structure included the elimination of input tax credit, increasing costs for the industry. As a result, we raised our base prices, still providing savings for our customers after tax," the company said.



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