Restaurants, hotels get tax cut, but no input tax credit

Taxes on hotel rooms priced below ₹7,500 and on crucial inputs like utensils are set to fall

- Soumya Gupta

Restaurants and hotel chains expect a boost in their revenues as taxes are set to decrease on hotel rooms priced below ₹7,500 and on crucial inputs such as processed food and utensils.

However, industry executives and analysts say the overall effect could be limited as the GST Council did not extend input tax credit to restaurants on the goods and services they buy—a key industry demand.

Goods and services tax (GST) on budget and mid-priced hotel chains has also been slashed, from the previous 12% rate to 5%, but without input tax credit.

"Restaurants will have two major benefits from this," Pranav Rungta, vice president of the National Restaurant Association of India (NRAI), told Mint. "The cost of input purchases, where we don't get input tax credit anyway, will drop by 7%. This will benefit QSRs [quick service restaurants] more as they use a lot of processed foods, which were in the 12% tax slab until now."