Harsimrat Kaur Badal takes up high GST rate on pickles, papad with Finance Ministry

Restaurants across the country complied with the lower goods and services tax (GST) rate of 5% after initial reluctance to do so, at least from some quarters. The new GST rates for a host of items from washing powders and razors to shampoo and watches.

Adarsh Shetty, president, Indian Hotel and Restaurant Association (AHAR) said “Almost all other associations have welcomed the move, arguing that it will not just benefit consumers but also make life simpler for restaurant owners, who do not have to comply with complicated filing requirements. It is very positive for everyone and there is no increase in prices.

Some members of the National Restaurants Association of India (NRAI), which largely represents upmarket chains, have been complaining about the government’s decision to withdraw input tax credit (ITC) and have argued that menu prices may rise by around 6% due to withdrawal of the benefit, which the trade body has said is a key characteristic of GST.

NRAI president Riyaaz Amlani said “Government’s decision was a step in the right direction although a source present in a closed-door meeting of some of the restaurant associations said some of the eateries were suggesting that prices on the ground will not change due to withdrawal of ITC. We are all on the same page and we welcome the decision,” told TOI, adding that the trade body will make a “logical case” for reintroduction of tax credits.”

For organised chains, the major concern is the tax that they pay on rent, which can add up to 20-25% of the annual expenditure. With a credit on 18% tax paid on rent, a part of the gains were available to restaurants by way of lower costs. It’s a different matter that they argued before the government that the overall benefit from ITC was only 1%, which the government believed added up to 6% a figure that now tallies with the calculation being dished out by some of the chains.

Dairy brand, Amul has reduced prices of cottage cheese, dairy whitener and baby food, increased the price of ghee and left cheese, butter and ice cream unchanged after the roll-out of Goods and Services Tax regime on Saturday.

Producers of pickles, jam, tomato ketchup, however, complained that GST had raised the taxation level and said sales had slumped after the onset of the new regime, while sellers of branded rice and wheat flour said their distributors had issues with the new system.

RS Sodhi, Managing Director, Amul said that implementation of GST had been normal.

He said, "We don’t expect any major change in revenue with implementation of GST. The consumer gets to gain. As there was substantial increase in tax for ghee we have increased prices by Rs 25-30 a kg. Cheese, butter and ice cream prices have not been changed as increase was marginal. However, we reduced prices of milk products which came under a lower slab by 5% like dairy whitener, paneer, baby food and cream."

Nitin Seth, MD, GD Foods, the maker of Tops brand of food products, said, "There was a slump in demand on the first day with modern retail stores -Kendriya Bhandar, Easy Day and others not doing the billing as systems were being updated for GST, and they were only selling essential commodities with manual billing. Everyone is trying to understand how things will work. We have not increased retail prices yet."

Rakesh Jain of Rajdhani Group said that they have increased wheat flour (atta) prices by 5%.

He said, "Implementation is a challenge as 90% of bulk packing of 50 kg is being sold unbranded. No one (distributor or retailer) is buying as of now. The other challenge is that retailers have not registered for GST."

Priyanka Mittal, Director, KRBL, which owns India Gate basmati, said that the company was GST ready.

She said, "The shocker is distributors have not placed orders as they expect GST on branded basmati to be reversed from 5% to zero."