The complex tax structure has been difficult to grasp for the public all the time. Therefore, to simplify the tax system, the authorities from India have proceeded with the GST bill. This will charge just one tax on every consumer. The main perk is that it saves consumers from every other tax. Along with the application of GST on restaurant, this sector has seen considerable impacts. Let’s evaluate its impacts on the restaurant business in this post.
The tax system before GST introduction
Before you evaluate the effects of GST on restaurant, how about we check out the tax structure beforehand. In this period, there were three main elements in the dining place bill.
- Service Tax: This element means the charged tax on the applicable services delivered by the dining business.
- Service Charge: This charge is applicable to dining places. For your information, it is counted as an income applied to the hotels. You had better not confuse it with service tax. In other words, Service Charge does not lie in the tax component. Instead, it is only a quantity gathered from the consumer and sent to the government.
- Value Added Tax (aka VAT): This tax is the one levied on the dishes taken by the customers.
What is GST?
GST is short for Goods and Services Tax. Following the regime of the GST, the manufacturer needs to pay Goods and Services Tax on the value-added. Meanwhile, it is necessary for the consumer to make the tax payment just on the margin of the retail business. When it comes to the main perk of GST for traders, the applicable tax will stay the same all over the nation. Therefore, they have the choice to buy raw materials from any region of the nation at a less pricey rate. In terms of end consumers, it is simpler for them to grasp the final bill. That is because it just contains GST.
The impacts of GST on restaurant business
Increase in rentals
Amid the application of GST on restaurant, there is no longer the Input Tax Credit. For the dining businesses, they will not claim the GST tax paid on rentals. As per dining places, the rental cost tends to increase by about 16%.
Expansion strategies of many chains kept on hold
Is your dining business having a plan of expanding many chains? If so, you should halt this strategy. Also, you should pay attention to other beneficial stuff. For example, you can pay more attention to the 5-star hotels so that you can take advantage of the Input Credit Tax.
Adjustment to digital food delivery business
The GST on restaurant has left a lot of dining places to begin a digital platform. As for the key perk of this, you do not have to pay big rentals, dissimilar to physical restaurants. Thanks to online restaurant control systems, you can make smooth integration of many channels, for example, websites.
Finally, because you have evaluated the impacts of GST on restaurant business, contact us for what to do next to thrive your business.