With the Goods and Service Tax (GST) levy on both AC and non-AC restaurants coming down to 5 per cent from today, dining out is expected to get a lot more cheaper. The GST Council, in its 23rd meeting in Guwahati, had slashed the tax rate from 18 per cent to just 5 per cent. However, restaurants will not be able to take the benefit of input tax credit (ITC). Liquor, however, will attract state levies like VAT as it was kept outside the GST regime.

The new tax structure for restaurants, which is being implemented from November 1, comes days after the Finance Minister Arun Jaitley expressed his displeasure over eateries not passing on the benefit of input tax credit to restaurant-goers. "All members of the GST Council felt that input tax credit (ITC) to restaurants is not passed on customers. Goods and Service Tax (GST) was being charged on existing rates which put additional tax burden on restaurant goers. Thus, we decided that restaurant industry will not get the benefit of ITC," Finance Minister Arun Jaitley had said.

In the 23rd GST Council meet, tax rate for all AC and non-AC restaurants was fixed at 5 per cent. "Since they did not pass on the ITC benefit to customers, they will not be eligible for the benefit themselves," Jaitley had said. Restaurants inside hotels will also levy 5 per cent GST, except in starred hotels where the tariff is Rs 7,500 or more. The rate for restaurants in starred hotel will remain 18 per cent along with the benefit of input tax credit. Outdoor catering will also be taxed at 18 per cent along with ITC.

Effectively, it will be a universal composition scheme in the restaurant sector, said Finance Minister Arun Jaitley had said during a press meet after the Council meet.

Meanwhile, restaurant sector seems discontent with the decision of not getting the ITC benefit. "The government will be short-changed," Rahul Singh, president of National Restaurant Association of India (NRAI) told CNBC TV 18 on Friday. "The very concept of Input Tax Credit (ITC) is central to GST which is to prevent cascading of taxes," Singh had said.

Welcoming the move by the GST Council, the apex industry body said it had sought bringing down GST rate on restaurants to 12 per cent with input tax credit or at 5 per cent without input tax credit. "We are extremely thankful to the government for making these much required changes in the GST regime. This will help restaurants across India rationalise tariffs," FHRAI president Garish Oberoi had said.