Leading fast-food chains such as McDonald’s have got queries from tax officials seeking details about menu prices before and after GST rate cuts on November 15. The move follows reports of some food chains raising prices. The government is keen to ensure the benefit of GST reduction is passed on to consumers.
The National Restaurant Association of India (NRAI) has said it will soon be advertising price cuts. State GST authorities have made phone calls and sent questionnaires to restaurants. ET has seen a copy of the format in which restaurants have been asked to submit details. A government official said the exercise was aimed at collecting data. “Many restaurant associations and owners in the organised space have received communication from relevant authorities to outline the GST implementation process,” a McDonald’s spokesperson said.
“We are in the process of furnishing the details appropriately.” This is besides a letter from Central Board of Excise and Customs (CBEC) chairman Vanaja Sarna to companies and restaurants individually asking them to pass on tax cuts and communicate price revisions to consumers. At the GST Council meeting on November 15, GST was cut to 5% from 18% for all standalone restaurants, irrespective of whether they were airconditioned or otherwise, without input tax credit.
Also, a flat 5% slab was imposed on takeaways and deliveries. Soon after GST reduction, many restaurants raised menu prices, citing withdrawal of credit for taxes paid on raw material and rent as the reason for ‘price adjustments.’ Brands such as Starbucks and McDonald’s had hiked base price of some products. GST on 178 goods was lowered to 18% from 28% as part of rationalisation approved by the GST Council.
“Like many businesses operating in India, Tata Starbucks adjusted prices following the recent revision of the goods and services tax (GST) structure,” a Tata Starbucks spokesperson said. “The GST revision included the elimination of the input tax credit, increasing costs for the industry.
As a result, we raised our base prices, while still providing savings for our customers after tax. Pricing is continually evaluated on a product-by-product basis in our stores to balance business needs while continuing to provide value to our customers.” Incidentally, a number of complaints before state screening committees on anti-profiteering were either against restaurants or real estate companies. The union cabinet last week cleared the setting up of an antiprofiteering authority to examine such allegations under GST regime.
CUTS IN MENU PRICE
NRAI, which has some popular food chains as members, said restaurants are proposing cuts in menu price. “The move by the government has made the consumer bill come down, which will encourage demand and investment for our sector and we will soon be providing wide publicity of all the benefits,” said NRAI vice-president Rahul Singh. All major brands will engage in this exercise, he said.
“Changes came into effect from November 15 and all restaurants updated systems overnight in order to pass on the tax benefit to the consumers,” NRAI’s Singh said. “Depending on the category of the restaurant, price adjustment exercise to the base menu price had to be done to rationalise the removal of ITC (input tax credit).”
A Jubilant FoodWorks spokesperson said the GST cuts had been reflected in its prices. “Jubilant FoodWorks has passed on benefits of GST reduction to all our customers of both Domino’s Pizza and Dunkin’ Donuts,” the person said. “Since denial of input tax credit has led to increase in the input cost, we have adjusted prices of a few items to only partially cover this increased cost. However, our customers will now witness a significant reduction in effective prices immediately.”
Source: Economic Times