Eating out should be cheaper now: Finance minister Dr T M Thomas Isaac

Thiruvananthapuram: Finance minister Dr T M Thomas Isaac said that under the GST regime, eating out should actually become cheaper. “However, restaurants have used GST as an excuse to jack up prices,” the minister said on Monday. He also published a table showing how prices had actually gone down in most of the cases under the new regime. The minister said he would hold discussions with hotel and restaurant associations to seek their cooperation. The minister said restaurants were clamping GST upon existing prices without taking out the earlier impositions.

Take for instance a vegetarian meal in an AC restaurant with an annual turnover above Rs 75 lakh. Isaac’s table assumes the price of a meal at Rs 75. This includes the tax paid on the Rs 35 he had incurred on the raw materials he had purchased for the meal (Rs 2.45), the tax paid on consumables like cooking gas (50 paise), the service tax of 5.8 percent (Rs 4.50), and also the compounding VAT tax (50 paise). Together the total tax outgo on the Rs 75 meal is 7.95. Now that all these taxes have gone, the price of the meal is Rs 67.05 (Rs 75- Rs 7.95).

“The GST of 18 percent should be applied on the actual cost of Rs 67.05. Then the price will be only Rs 79.12, and not Rs 85.50 had the restaurant applied the GST on the existing price of Rs 75,” Isaac said. However, in restaurants with an annual turnover of less than Rs 75 lakh, prices of meals and chicken items should actually go down. A chicken item costing Rs 350 in an AC restaurant should cost only Rs 308.70 but restaurants now charge Rs 397.50.