BENGALURU: Prices of food items served at hotels, restaurants and fast-food joints are expected to go up from July 1 with the GST Council deciding on a tax rate of 12% for annual turnover above Rs 50 lakh.Those with a turnover below the Rs 50-lakh threshold will collect a GST rate of 5%.A large number of fast-food joints, which are unclear which way their annual turnover will swing, may choose to collect 12% not wanting to rub the taxman the wrong way on a future date. This category of businessmen is unlikely to collect 5% GST rate and invite risks later if the turnover were to exceed the threshold limit.Bengaluru is home to tens of thousands of the Darshini format restaurants which serve south, north Indian snacks and beverages at pocket-friendly prices. Many of these do a business of above Rs 50 lakh a year and all these will pass the higher tax on customers. Someone drinking coffee for Rs 5 all these days will now pay Rs 5.60 and these consumers are unlikely to pay this additional 60 paise without a crib.Since these smaller outlets cater to large segments of population, most of whom earn a modest income, the new levy is likely to come under criticism. All these years, hotels had the option of paying a 4% tax on their total turnover under the composition scheme. This made them ineligible to claim input tax rebates.“Most of the items that we use in the hotel industry as inputs are already exempt from tax. So the extent of rebates under the GST regime will be minimal,“ said P Sadananda Maiya , founder of Maiyas, a chain of restaurants. “All kinds of hotels will collect this higher tax rate and this will lead to an overall increase in prices of food items,“ he said.“The GST rate for AC restaurants with bar licence is fixed at 18%, but there is no clarity on how much tax AC restaurants without bars have to collect from customers,“ Maiya said. R Prabhakar , the man who pioneered the Darshini model, had no doubt that the new tax rate will push up food prices and hurt middleand low-income consumers.“High-end hotels can absorb higher rates of taxation but not tens of thousands of small outlets. This will defeat the very concept of Darshinis that are able to sell food items at affordable prices because of the composition scheme. Not retaining the composition scheme would lead to harassment of hote liers by taxmen, and corruption,“ Prabhakar said.Karnataka, according to BA Harish Gowda, a former Commissioner of Commercial Taxes, always extended the composition benefits to businesses in a few sectors that source their inputs from unorganised sectors in view of the difficulties they would otherwise face with compliance. The GST regime requires a hotelier to generate a bill net of input taxes already paid, add his margin, and show State GST and Central GST separately before issuing the invoice, a copy of which the hotel will have to keep to report compliance.