Impact of GST on Food Services & Restaurant Business. How can you prepare yourself for this.

According to the National Restaurant Association of India’s 2013 India Food Service Report, the current size of the Indian food service industry is ₹2,47,680 crore and is projected to grow to 4,08,040 crore by 2018 at the rate of 11%.

Indian Food Service Industry

All these figures look promising. However, as an end consumer, we hardly pay attention to our food bill in these restaurants and most of us are not even aware of the components included in it.

What is the Impact on End Consumers?

Today if you revisit your food bill from last week’s fine-dine experience, you’ll find Service Tax, Service Charge, VAT being added over and above the food value. Under the GST regime service, Tax and VAT amount will be subsumed into one single rate, but you may still find service charge doing rounds on your food bill.

Small comparison of how your food bill looks today as compared to how it’ll look in the GST regime.

Impact of GST on Final Consumer’s Food Bill

So assuming a standard rate of 18% under GST, which is most likely, a consumer will save around Rs. 55 on a transaction value of Rs. 2,200. Here we have assumed that VAT is applicable at 100% of the value without any abatement, this may differ in certain states on the basis of the judgment of the high court. Furthermore, if we see the effective rate of tax under the current regime, it sums up to around 20.5% which will come down to 18%.

Impact on Restaurant Business Owners

Similarly, restaurant owners have more reason to cheer in the upcoming regime. Under the current tax regime, restaurant business owners do not get any option to adjust the output service tax liability with the credit of input VAT on goods consumed. However, under the new regime both these taxes will get subsumed into GST and thus irrespective of goods and services, the credit of input will be available for adjustment against the output liability. This will further optimize the working capital of these restaurants and consumers can expect a more superior quality of food and services.

Impact of GST on Restaurant Owner’s Bill

Now assuming that a restaurant owner has purchased inputs worth ₹1,500, in the above example, the total amount payable to the tax authorities under the current regime sums up to ₹233.50. However, under GST, net outflow from the pocket will be ₹126, thus his working capital will be enhanced to the extent of ₹107.50, an illustrative figure.

Thus we can fairly conclude that GST will bring reasons to rejoice for both consumers and restaurant owners under the new regime and we will have more reason to explore the new food joints in our neighborhood and pamper our taste buds.

Few things that may change after the GST is live:

  1. Swiggy will not cater to those who are not GST compliant. This could mean losing that portion of the revenue you were generating from swiggy.
  2. You have to display your TIN number and Licence number on all your bills.
  3. Report all your restaurant Inventory details to the government once in two months. Including your total revenue.

NOW, are the restaurants ready for this change?

How do you track your inventory and revenue if you don’t have any POS integrated to your restaurant? You will have to track all your inventory bills and revenue bills and maintain a complete record of the sales done by you. This could take a lot of time if things are not segregated. How to simplify this??

You can invest in any POS to be integrated to your restaurant or try our CLOUD BASED POS for more information kindly register here and we will call you and explain everything you need to know.

Contact us:

+91 9008651929