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IMPACT OF GST ON RESTAURANTS

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)

Under the Faculty of Commerce

SHIVANI VIJAY SHINDE

Roll No: 909

Under the Guidance of

Ms. PRITI JHA

CHIKITSAK SAMUHA’S
S. S. & L. S. PATKAR COLLEGE OF ARTS & SCIENCE,
AND
V. P. VARDE COLLEGE OF COMMERCE & ECONOMIC
S. V. ROAD, GOREGAON (WEST), MUMBAI-400 104.

April 2022
IMPACT OF GST ON RESTAURANTS
A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)

Under the Faculty of Commerce

SHIVANI VIJAY SHINDE

Roll No: 909

Under the Guidance of

Ms. PRITI JHA

CHIKITSAK SAMUHA’S
S. S. & L. S. PATKAR COLLEGE OF ARTS & SCIENCE,
AND
V. P. VARDE COLLEGE OF COMMERCE & ECONOMIC
S. V. ROAD, GOREGAON (WEST), MUMBAI-400 104.

April 202
INDEX
CHAPTER CHAPTER NAME PAGE
NO NO
1 INTRODUCTION
1.1 What is tax? 2-3
1.2 What is GST (goods and service tax)? 4
1.3 Historical background of GST 5-8
1.4 Formation of GST and GST launch 8-9
1.5 Advantages and disadvantages of GST 10-13
1.6 Types of GST 14-17
1.7 GST and restaurant industry 18-19
1.8 Impact of GST on restaurants 20-21

1.9 Impact of GST on restaurants’ Owners 22-24

1.10 GST bill on restaurant 25-28

1.11 Impact on consumers 29
1.12 GST effect on restaurant and GST on food items 30-31
2 RESEARCH METHODOLOGY
2.1 Objective of the study 32

2.2 Hypothesis 33
2.3 Scope of the study 34
2.4 Limitations of the study 35
2.5 Selection of the problem 36
2.6 Sample size 36
2.7 Source of data 37

3 LITERATURE REVIEW 38-41

4 DATA ANALYSIS INTERPRETATION 42-56

AND PRESENTATION
5 CONCLUSION AND SUGGESTION 57-59

6 BIBLIOGRAPHY 60

7 ANNEXURE 61-64
CHIKITSAK SAMUHA’S
S.S. & L.S. PATKAR COLLEGE OF ARTS & SCIENCE

AND V.P. VARDE COLLEGE OF COMMERCE & ECONOMICS

S.V. ROAD, GOREGAON (WEST), MUMBAI – 400104.

CERTIFICATE

This is to certify that Ms. Shivani Vijay Shinde has worked and duly completed her
project work for the degree of Bachelor in Commerce (Accounting & Finance) under
the Faculty of Commerce and her project is entitled on “Impact of GST on
Restaurants” under my supervision. I further certify that the entire work has been
done by the learner under my guidance and that no part of it has been submitted
previously for any degree or diploma of any university.

It is her own work and parts reported by her personal findings and investigations.

____________________________

Ms.Priti Jha
(Project Guide)

_____________________________

Ms. Zeba Khan

(Course Coordinator)

_____________________________

External Guide

Date of submission:
DECLARATION BY LEARNER

I, Shivani Vijay Shinde hereby, declare that the work embodied in this project work
titled “Impact of GST on Restaurants” forms my own contribution to the research
work carried out under the guidance of Ms. Priti Jha is a result of my own research
work and has not been previously submitted to any other University for any other
Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

__________________

Shivani V. Shinde
Roll No. 909

___________________________

Certified by Ms. Priti Jha

ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth
is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my I/c Principal - Dr. Trisa Joseph, for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator Ms. Zeba Khan, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my Project Guide, Ms.
Priti Jha whose guidance and care made the project successful.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project.

__________________
Shivani V. Shinde
Roll No. 909
ABSTRACT
This article presents the findings of an impact analysis on something very close to and
dear to us – or, rather, to our stomachs – the restaurant. The study's goal is to
highlight the impact of GST on the restaurant business in India. I researched the
various aspects of GST and how it has affected the restaurant industry. My research
focused on the effects of GST implementation on restaurants. According to the
National Restaurant Association of India's 2019 India Food Service Report, the Indian
food service industry was worth Rs 1, 48,353 crore in 2018-19 and is expected to
grow to Rs 2, 57,907 crore in 2022-2023 at a CAGR of 15%.

Restaurants and Food Service Businesses are the fastest growing industry in India. As
a result of the changes in the tax collection framework, the business's development is
hampered. The introduction of the Goods and Services Tax has caused some
consternation among restaurant owners. The concept of goods and services tax was
implemented to eliminate all extra money charging schemes that were previously used
by retailers to make money. This reform will clearly decrease the consistence cost for
the tax payer as under this system the operation will change into uniform entity across
states and the tax structure will also be harmonize. The restaurant sector was burdened
with multiple high costing taxes and changes under previous tax collection
framework. Previously consumers use to pay VAT, service tax and additional service
charge on every restaurant bill but in GST all the extra and unnecessary charges were
eliminated. In the GST taxation system all the slabs were clearly stated but many
restaurants still are confused and restaurant owners are applying rates and taxes as
they interpret, or according to their own wish. This study analyses impact of GST on
Restaurants and Food Service Businesses in India. This growth is further fueled by the
growth of the great Indian middle class. Rapid urbanization, growing awareness of
western lifestyles, more women joining the workforce, and higher disposable income
were some of the factors that contributed to the growth of the restaurant industry. As a
result, we find ourselves waiting in queues in most of the restaurants during the
weekend.

1
CHAPTER 1

INTRODUCTION

1.1 WHAT IS TAX?

The word tax comes from a Latin word “taxo”. Taxes are levied by governments on
their citizens to generate income for undertaking projects to boost the economy of the
country and to raise the standard of living of its citizens. The authority of the
government to levy taxes in India is derived from the Constitution of India, which
allocates the power to levy taxes to the Central and State governments. All taxes
levied within India need to be backed by an accompanying law passed by the
Parliament or the State Legislature.

TYPES OF TAX
There are two main categories of taxes, which are further sub-divided into other
categories. The two major categories are direct tax and indirect tax.

• DIRECT TAX

• INDIRECT TAX

DIRECT TAX: A direct tax is a tax that a person or organization pays directly to the
entity that imposed it. An individual taxpayer, for example, pays direct taxes to the
government for various purposes, including income tax, real property tax, personal
property tax, or taxes on assets.

2
▪ Income Tax
▪ Wealth Tax
▪ Corporate Tax
▪ Capital Gains Tax
▪ Securities Transaction Tax (STT)
▪ Fringe Benefit Tax

INDIRECT TAX: Indirect tax is defined as the tax imposed by the government on a
taxpayer for goods and services rendered. Unlike direct taxes, indirect tax is not
levied on the income, revenue or profit of the taxpayer and can be passed on from one
individual to another

▪ Service tax
▪ Excise duty
▪ Value Added Tax
▪ Custom Duty
▪ Excise Duty
▪ Anti-Dumping Duty
▪ Newly Implemented Indirect Tax (GST)

3
1.2 WHAT IS GST (GOODS AND SERVICE TAX)?
GST is a multi-stage, all-encompassing tax system that applies to the sale of goods
and services. The fundamental goal of this taxing scheme, which is applicable
throughout India, is to reduce the cascading effect of other indirect taxes. The Goods
and Services Tax (GST) is a tax that applies to both goods and services. It is an
indirect tax that was implemented to replace a variety of other indirect taxes such as
VAT, service tax, purchase tax, excise duty, and so on. GST is a tax applied in India
on the supply of certain goods and services. It is a single tax that is imposed across the
country.

Goods and Services Tax (GST) is an indirect tax (or consumption tax) imposed in
India on the supply of goods and services. GST is imposed at every step in the
production process, but is meant to be refunded to all parties in the various stages of
production other than the final consumer. Goods and services are divided into five tax
slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. 32% However, Petroleum
products, alcoholic drinks, electricity, are not taxed under GST and instead are taxed
separately by the individual state governments, as per the previous tax regime. There
is a special rate of 0.25% on rough precious and semi-precious stones and 3% on
gold. In addition access of 22% or other rates on top of 28% GST applies on few
items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax
rate for most goods was about 26.5%, Post-GST; most goods are expected to be in the
18% tax range. The tax came into effect from July 1, 2017 through the
implementation of One Hundred and First Amendment of the Constitution of India by
the Indian government. The tax replaced existing multiple flowing taxes levied by the
central and state governments. The tax rates, rules and regulations are governed by the
GST Council which consists of the finance ministers of center and all the states. GST
is meant to replace a slew of indirect taxes with a federated tax and is therefore
expected to reshape the country's 2.4 trillion-dollar economy, but not without
criticism. Trucks' travel time in interstate movement dropped by 20%, because of no
interstate check posts.

4
1.3 HISTORICAL BACKGROUND OF GST

The detailed events according to various timelines for GST implementation in India
are granted below:

2000: In India, the idea of adopting GST was first suggested by the Atal Bihari
Vajpayee Government in 2000. The state finance ministers formed an Empowered
Committee (EC) to create a structure for GST, based on their experience in designing
State VAT. Representatives from the Centre and states were requested to examine
various aspects of the GST proposal and create reports on the thresholds, exemptions,
taxation of inter-state supplies, and taxation of services. The committee was headed
by Asim Dasgupta, the finance minister of West Bengal. Dasgupta chaired the
committee till 2011.

2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance
ministry indicated that the existing tax structure had many issues that would be
mitigated by the GST system.

February 2005: The finance minister, P. Chidambaram, said that the medium-to-long
term goal of the government was to implement a uniform GST structure across the
country, covering the whole production-distribution chain. This was discussed in the
budget session for the financial year 2005-06.

February 2006: The finance minister set 1 April 2010 as the GST introduction date.

November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned

that states will have to prepare and make reforms for the upcoming GST regime.

February 2007: The 1 April 2010 deadline for GST implementation was retained in
the union budget for 2007-08.

February 2008: At the union budget session for 2008-09, the finance minister
confirmed that considerable progress was being made in the preparation of the
roadmap for GST. The targeted timeline for the implementation was confirmed to be
1 April 2010.

5
July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic
skeleton of the GST system. The 1 April 2010 deadline was being followed then as
well.

November 2009: The EC that was headed by Asim Dasgupta put forth the First
Discussion Paper (FDP), describing the proposed GST regime. The paper was
expected to start a debate that would generate further inputs from stakeholders.

February 2010: The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1, 133 crore,
computerized commercial taxes in states. Following this, the implementation of GST
was pushed by one year.

March 2011: The government led by the Congress party puts forth the Constitution
(115th Amendment) Bill for the introduction of GST. Following protest by the
opposition party, the Bill was sent to a standing committee for a detailed examination.

June 2012: The standing committee starts discussion on the Bill. Opposition parties
raise concerns over the 279B clause that offers additional powers to the Centre over
the GST dispute authority.

November 2012: P. Chidambaram and the finance ministers of states hold meetings
and set the deadline for resolution of issues as 31 December 2012.

February 2013: The finance minister, during the budget session, announces that the
government will provide Rs.9, 000 crore as compensation to states. He also appeals to
the state finance ministers to work in association with the government for the
implementation of the indirect tax reform.

August 2013: The report created by the standing committee is submitted to the
parliament. The panel approves the regulation with few amendments to the provisions
for the tax structure and the mechanism of resolution.

October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of
Rs.14, 000 crore per annum, owing to the destination-based taxation rule.

May 2014: The Constitution Amendment Bill lapses. This is the same year that
Narendra Modi was voted into power at the Centre.

6
December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution
(122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the
Bill be sent for discussion to the standing committee.

February 2015: Jaitley, in his budget speech, indicated that the government is
looking to implement the GST system by 1 April 2016.

May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also
announced that petroleum would be kept out of the ambit of GST for the time being.

August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the
disruption had no specific cause.

March 2016: Jaitley says that he is in agreement with the Congress’s demand for the
GST rate not to be set above 18%. But he is not inclined to fix the rate at 18%. In the
future if the Government, in an unforeseen emergency, is required to raise the tax rate,
it would have to take the permission of the parliament. So, a fixed rate of tax is ruled
out.

June 2016: The Ministry of Finance releases the draft model law on GST to the
public, expecting suggestions and views.

August 2016: The Congress-led opposition finally agrees to the Government’s

proposal on the four broad amendments to the Bill. The Bill was passed in the Rajya
Sabha.

September 2016: The Honorable President of India gives his consent for the
Constitution Amendment Bill to become an Act.

2017: Four Bills related to GST become Act, following approval in the parliament
and the President’s assent:

Central GST Bill

Integrated GST Bill

Union Territory GST Bill

GST (Compensation to States) Bill

7
The GST Council also finalized on the GST rates and GST rules. The Government
declares that the GST Bill will be applicable from 1 July 2017, following a short delay
that is attributed to legal issues.

1.4 FORMATION OF GST

With the introduction of the Modified Value Added Tax (MVAT) in 1985, Finance
Minister Rajiv Gandhi began reforming India's indirect tax regime (MODVAT).
Following that, Prime Minister P V Narasimha Rao and his Finance Minister Man
Mohan Singh initiated early discussions at the state level on a Value Added Tax
(VAT). A single common "Goods and Services Tax (GST)" was proposed and given a
go-ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee
and his economic advisory panel, which included three former RBI governors IG
Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the
Finance Minister of West Bengal, Asim Dasgupta to design a GST model. The Ravi
Dasgupta committee which was also tasked with putting in place the back-end
technology and logistics (later came to be known as the GST Network, or GSTN, in
2015). It later came out for rolling out a uniform taxation regime in the country. In
2002, the Vajpayee government formed a task force under Vijay Kelkar to
recommend tax reforms. In 2005, the Kelkar committee recommended rolling out
GST as suggested by the 12th Finance Commission. A 21-member selected
committee was formed to look into the proposed GST laws. After GST Council
approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the
Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory
Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax
(Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were
passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6
April 2017 and was then enacted as Acts on 12 April 2017. Thereafter, State
Legislatures of different States have passed respective State Goods and Services Tax
Bills. After the enactment of various GST laws, Goods and Services Tax was
launched all over India with effect from 1 July 2017.

8
GST LAUNCH

The President of India and the Government of India officially launched the GST on
July 1, 2017, at midnight. The launch was marked by a historic midnight session of
both houses of parliament convened at the Central Hall of Parliament (30 June – 1
July). Despite the fact that high-profile guests from the business and entertainment
industries, including Ratan Tata, attended the session, the opposition boycotted it due
to the problems that it was bound to cause for middle and lower-class Indians. It is
one of only a few midnight sessions held by parliament, the others being the
declaration of India's independence on 15 August 1947, as well as the silver and
golden jubilees commemorating that occasion. After its launch, the GST rates have
been modified multiple times, the latest being on 22 December 2018, where a panel of
federal and state finance ministers decided to revise GST rates on 28 goods and 53
services. Members of the Congress boycotted the GST launch altogether. They were
joined by members of the Trinomial Congress, Communist Parties of India and the
DMK. The parties reported that they found virtually no difference between the GST
and the existing taxation system, claiming that the government was trying to merely
rebrand the current taxation system.] They also argued that the GST would increase
existing rates on common daily goods while reducing rates on luxury items, and affect
many Indians adversely, especially the middle, lower middle and poorer income
group.

9
1.5 ADVANTAGES AND DISADVANTAGES OF GST

• ADVANTAGES OF GST
1. GST eliminates the cascading effect of tax

GST is a comprehensive indirect tax that was designed to bring the indirect taxation
under one umbrella. More importantly, it is going to eliminate the cascading effect of
tax that was evident earlier. Prior to the establishment of GST, there was a cascading
impact of taxes, which was eliminated once GST was implemented. The GST has
almost completely eliminated the tax-on-tax effect on goods and services.

GST has managed to lower the cost of goods and services by including all indirect
taxes under its umbrella. As a result, one of the most important benefits of GST is the
consistency of taxes.

2. Higher threshold for registration

Businesses had to pay Value Added Tax if their sales exceeded Rs. 5 lakh prior to the
introduction of the GST. The amount, once again, varies by state.

The threshold value has been increased by Rs. 15 lakh with the adoption of GST,
making the new threshold limit Rs. 20 lakh. Small and medium-sized enterprises
would be relieved by the increase in the VAT threshold limit.

Let us look at this table below:

Tax Threshold Limits

Excise 1.5 crores

VAT 5 lakhs in most states

Service 10 lakhs
Tax

GST 20 lakhs (10 lakhs for NE states)

10
3. Composition scheme for small businesses
Composition Scheme is a simple and easy scheme under GST for taxpayers. The
Government introduced the composition scheme to assist small taxpayers and reduce
the compliance burden. Small taxpayers can get rid of tedious GST formalities and
pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose
turnover is less than Rs. 1.5 crore Under GST, small businesses (with a turnover of Rs
20 to 75 lakh) can benefit as it gives an option to lower taxes by utilizing the
Composition scheme. This move has brought down the tax and compliance burden on
many small businesses.

4. Smooth and quick online processing

Another big advantage of the new GST reign is the online filing of tax returns. You
just need to visit the GST Portal, create your new account, log in, and start filing GST
returns. The interface of the portal is fairly smooth and straightforward. You can file
your GST on your own with basic knowledge of computers and the internet. You can
get all the details regarding the GST jurisdictions, GST laws that you have to comply
with, and all the relevant information regarding filing the GST on the portal itself.

One of the biggest beneficiaries of this new GST portal is startups. With the help of
an online GST portal, it becomes easy to establish transparency among tax
jurisdictions between State and Central governments.

5. Reduced Corruption
The GST has been designed to be a major blow to corruption. Every time goods had
to come into local areas for sale, they were taxed by local bodies. Once again the tax
rates here were not the entire problem. These taxation points often lead to huge
queues and even traffic snarls outside major cities. The corrupt officials would
needlessly delay the trucks from entering the city with their red-tapism. Tired of
waiting at check points, the logistic companies would usually resort to bribing the
officials in order to save time and therefore money. Multiple taxes meant multiple
officers had to be bribed. By implementing a one tax system, the Indian government
has significantly reduced the corruption prevalent in the economy

11
• DISADVANTAGES OF GST
1. GST Scheme has increased the cost of operation

With the GST in place, businesses have to update their books and accounting with the
latest GST-compliant software or Enterprise Resource Planning (ERP) software to
keep their business afloat. ERP software is costly, and it takes proper training to
manage and run this software, thereby increasing the cost to companies. Moreover,
compliance with GST norms has drastically increased the operational cost of SMBs,
and they have to hire professionals to help them out with the GST laws.

2. High compliance burden

Compliance under GST is very high due to filing of three tax returns in a month. Not
only that if a person is doing business in multiple states then it needs to obtain
multiple registrations for each state and separate GST returns needs to be filed for
each state. This structure of GST has increased compliance burden and it is causing
pain mainly for compliances mainly for small businesses which cannot spend high
costs on support functions such as accounting and taxation etc.

3. Impact on working capital

Working capital is the money required for the day-to-day running of a business. Many
enterprises, especially SMEs, have seen a negative impact on their working capital
after the implementation of GST. Operational costs have gone up, while traders and
exporters have not been able to claim their tax returns promptly. Even services have
become more expensive due to a negative impact on the company’s working capital.
This demonstrates one of the other disadvantages of GST.

4. GST will mean an increase in operational costs

As we have already established that GST is changing the way how tax is paid,
businesses will now have to employ tax professionals to be GST-complaint. This will
gradually increase costs for small businesses as they will have to bear the additional
cost of hiring experts. Also, businesses will need to train their employees in GST
compliance, further increasing their overhead expenses.

12
5. GST is an online taxation system

Online return filing and making payments. This might be tough for some smaller
businesses to adapt unlike earlier, businesses are now switching from pen and paper
invoicing and filing to.

Cloud-based GST billing software like the Clear Tax GST Billing Software is
definitely an answer to this problem. The process for return filing on Clear Tax GST
is very simple. Business owners need to only upload their invoices, and the software
will populate the return forms automatically with the information from the invoices.
Any errors in invoices will be clearly identified by the software in real-time, thus
increasing efficiency and timeliness.

6. GST came into effect in the middle of the financial year

As GST was implemented on the 1st of July 2017, businesses followed the old tax
structure for the first 3 months (April, May, and June), and GST for the rest of the
financial year. Businesses may find it hard to get adjusted to the new tax regime, and
some of them are running these tax systems parallels, resulting in confusion and
compliance issues.

13
1.6 TYPES OF GST

As per the newly implemented tax system, there are 4 different types of GST:

1. CENTRAL GOODS AND SERVICES TAX (CGST)

2. STATE GOODS AND SERVICES TAX (SGST)
3. INTEGRATED GOODS AND SERVICES TAX (IGST)
4. UNION TERRITORY GOODS AND SERVICES TAX (UTGST)

1. Central Goods and Services Tax (CGST)

CGST stands for Central Goods and Services tax. It replaced all the previous taxes
under the Central Government. Some examples of such taxes are central surcharges &
cess and central excise duty. CGST is levied on the movement of goods within a
state.

To understand the meaning of CGST, let us take an example.

If a manufacturer produces a good in West Bengal and sells it intrastate (within the
state), both SGST and CGST will be levied. The former will go to the West Bengal
State Government, whereas the latter will reach the Central Government. In most
cases, the tax is divided equally between the State and Central Governments as per the
GST council mandate.

Let us see the CGST applicable on various goods in the following table.

Goods CGST Percentage

Household items like tea, coffee, edible oil,

sugar, and spices, life-saving medicines, Indian 2.5%
sweets, and coal

Computer products and processed foods 6%

Capital products, hair oils, toothpaste, soaps, 9%

and industrial goods

ACs, motorcycles, refrigerators, luxury items 14%

14
2. State Goods and Services Tax (SGST)

The GST collected by the State Government is known as SGST, which is applicable
on transactions within its geographical boundaries. Under the new tax regime,
previous state taxes like entertainment tax, VAT, and State Sales tax became non-
functional. SGST stands for State Goods and Services tax, a single tax levied on
intrastate supplies of goods and services, except for alcoholic liquor. It can be charged
solely on a product’s transactional value – an amount the buyer needs to pay.

SGST features might vary state-wise since each State Government has individual acts.
However, specific characteristics like taxable events, valuation, classification of
goods and services, and measures are similar across the nation.

Thus, this tax embodies the objective of this new tax regime: one tax, one nation.

Refer to the table below to learn the maximum rate of SGST.

Products SGST Percentage

Household amenities like tea, sugar, etc. 2.5%

Medicines, coal, and Indian sweets

Processed food items like cheese and bread. 6%

Computers and laptops also fall under this group.

Capital goods, soaps, toothpaste 9%

Air conditioners, refrigerators, high-end vehicles. 14%

15
3. Integrated Goods and Services Tax (IGST)

IGST stands for Integrated Goods and Services tax. It is generally applicable during
interstate transactions, i.e., transactions between two different states. Among the types
of GST, it’s levied on supplies of products and services between two states and even
on exports and imports (IGST + customs). The Central Government is responsible for
its collection as per the IGST Act. Let’s simplify this with the help of an example.

Suppose a manufacturer from West Bengal sells goods to a customer in Maharashtra.

In this case, IGST will apply to the transaction value. The Central Government will
collect this sum. Later, this amount will be divided between the consumer state – in
this case, Maharashtra – and the Central Government.

Why does the tax go to the consumer state and not the manufacturing state? Because
the buyer incurs the tax.

Check the maximum rate of IGST applicable on different goods from the table below.

Products IGST Percentage

Household products like tea, sugar, etc. Indian 5%

sweets and life-saving drugs

Cheese, bread, other processed food items, 12%

desktops, laptops, et al.

Hair oil, toothpaste, soaps, capital goods 18%

Luxury items like ACs and refrigerators 28%

16
4. Union Territory Goods and Services Tax (UTGST)

UTGST stands for Union Territory Goods and Services tax, applicable to the
transaction of goods and services in the Union Territories. It is levied on the supply of
products in Andaman and Nicobar Islands, Lakshadweep, Daman Diu, Chandigarh,
and Dadra and Nagar Haveli. Note that UTGST is only applicable on Union
Territories without a legislature.

Hence, Delhi, Puducherry, and even the newly formed UTs of Jammu & Kashmir are
not liable for UTGST but SGST. Simply understanding the UTGST meaning is not
sufficient. You must also know the applicable rates.

This tax is collected by the Central Government and is a substitute for the State Goods
and Services tax in UTs. Thus, the UTGST percentage is similar to that of SGST,
which are 2.5%, 6%, 9%, and 14%.Furthermore, after understanding the types of GST
and rates associated with them, it is vital to know that some products are taxed at 0%.
Meat from mammals, birds and fish do not draw such a tax. Additionally, sanitary
napkins, bananas, apples, and grapes are other tax-free products.

17
1.7 GST AND RESTAURANT INDUSTRY

GST has a huge impact on all sectors such as Food & Hospitality, Housing &
Housing, FMCG, Railway Sector, Money Services, Information Technology, and
MSME. Gastronomy is heavily taxed at every point. From the purchase of raw
materials to the sale of finished products. Gastronomy has been regularly scrutinized
since demonetization. This industry in India is constantly growing and now it is
affected by GST – Goods and Services Tax. Therefore, we have considered giving a
detailed impact analysis of GST in the hospitality industry. If we talk of GST in
simple terms, it is going to make luxury restaurants unhappy since they are likely to
be more impacted and will have to pay whopping 28% GST tax.

Multiple taxes were charged from the customers at the final bill. In the previous tax
collection framework consumers had to pay three taxes: the Service Charge, Service
tax and Value Added Tax (VAT). Among these taxes the service charge which was
charged was not a tax. The government has not ordered any restaurant to levy service
charge and they do it on their own. Usually, this amount is 10% of the price of food
products that order. Consumers have two pay two taxes: service tax and Value Added
Tax. Under the GST tax system big traders of the organized sector will be at
advantageous stage as they will get one market to shop for raw materials from any
part of the country because the tax will stay the same everywhere the country. The
GST tax framework facilitates restaurants purchase raw materials at a less expensive
rate. The final bill for the customers is additionally clutter-free and much easier to
know for the end-customers, because it only consists of the GST. Both Service tax
and Value Added Tax have now been replaced by GST. Both Central GST and State
GST was applied. The same rates will also be applied by the local delivery
restaurants. 12% tax is played if the snacks sold from restaurants are pre-packed and
pre-cooked. GST is not levied on any liquor or liquor products. However, liquor
products will still work with VAT, as imposed by state. So, if alcoholic beverages and
food is ordered, GST on food and VAT on alcoholic beverages will be charged

Subsequent to implementation of GST, those eating out at restaurants have witnessed

a simplification of bill as GST replaced a multitude of taxes and cess such as VAT,
Service Tax and Krishi Kalyan cess to name a few. Subsequent to implementation of
GST on food, a decrease in the effective tax on restaurant bills was also evident to

18
customers. But the decrease in the cost of eating out for customers was observed to be
marginal at best. What’s more, GST has not affected service charge which is applied
by the restaurant, hence this is still payable by the customer in addition to GST on
food. For restaurant owners, the availability of input tax credit (ITC) subsequent to
implementation of GST was expected to increase the working capital availability for
restaurants. Later, amendments were made which reduced the ITC benefit for
restaurant owners. However, it is notable that, under current GST rules, this ITC
benefit is available only to those charging 18% GST, while restaurants/eateries
charging 5% GST on food services do not receive ITC benefits. In terms of GST on
food items such as vegetables, fruits, meat, etc., nil GST i.e. GST exemption has been
provided in case of most fresh as well as frozen products. It is only in case of food
stuff packed in containers with brand name that other GST rates are applicable. As of
yet, GST on food items or food services do not exceed 18% and no food items are as
of yet featured in the highest tax bracket of 28%. As a result, no major price
hikes/decreases have been reported subsequent to implementation of GST on food
items. GST bill is more like a boon to the organized traders as they will be getting a
single market for buying raw materials from any part of the country – as the tax will
be the same. The GST on Restaurants will surely help the restaurants in order to
purchase raw materials at a much cheaper rate. The final bill can be much easier to
understand by the end customers as it is only inclusive of the GST. Such GST rate
structure has been decided where the taxes are levied ranging from 5% to 28%.

There are different tax slabs for restaurants depending on their turnover and whether
they have air-conditioning or not. Restaurants with a turnover of less than Rs 50
lakh will be levied a tax rate of 5%; Non-AC restaurants will be charged 12% tax; Tax
rate for AC restaurants and those with the liquor license will be 18%; Restaurants
in 5-star hotels will attract a GST rate of 28%.The Tax rate under GST regime will be
leviable as supply of services, not as supply of goods on transaction value. Restaurant
services have been specified as composite service.

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1.8 IMPACTS OF GST ON RESTAURANTS
The GST system has a made an impact in the restaurant business. It brought a
positive impact on the small restaurants, QSRs but it has hampered the 5-star hotels
and restaurants. Non AC restaurants charge a 12% GST and AC restaurants charge
18%. A five-star restaurant and hotels charge 28% GST. But restaurants which have a
turnover of less than Rs. 50 lakhs are levied with 5% GST. Bakeries are the type of
food business that has most profited from the current GST system. They charge a levy
of 39% which previously was 26.5%.Changes in Marketing Strategy of Restaurants
and Food Service Businesses after Implementation of GST. GST has also affected the
popular promotional schemes ‘buy one get one free’. The freebies given away by
varied prepackaged product firms and food service firms are for boosting sales.
Although now with GST rollout from 1 July maximum of offers have been gradually
withdrawn. The companies currently ought to explore for totally different strategies
like discounts and products giveaways. Food service giant corporate like Jubilant
Food Works that operates Domino’s pizza chain and Pizza Hut by Yum restaurants
have conjointly taken off this freebie schemes of buy one get one free schemes off
their promoting lists and continued with discounts schemes. Tax specialists said a
corporation supplying something free should bear GST on that, and so, the policy
might extend to the pharmaceutical sector also. Under GST laws each time a free of
cost thing is sold- out the GST to be paid on the transactional value that has been
realized. This implies corporations might favor avoiding pre-defined discounts and
price reductions to prevent any confusion on GST charges on freebies and the
uncertainty on Input credit.

These new tax rules have led to little vendors and restaurants are pulling away from
on-line delivery start-ups. Under GST laws, companies must strive for deducting tax
collected at supply (TCS) after they build payments made to restaurants or vendors
exploitation their platform. This can deter online adaption of smaller restaurants with
a lower sale. Vendors, after a TCS of 2% (1% each of Central GST and State GST)
will receive their payment which will cause disruption in the supply of working
capital. Under GST, restaurants are going to be ready for input tax credit claim and
refund for TCS by them. However meanwhile the refund arrives, the sum of working
capital of restaurants remains blocked. Aggregator models used by online food service
companies are best fitted to smaller restaurants, vendors and businesses adding that

20
TCS would hit methods of on boarding more and more restaurant. With the
introduction of GST, Input Tax Credit was removed. For the restaurants they cannot
claim the GST paid on raw materials and rentals. As per restaurants, the capital
expenses and the rental cost shot up by 15-18%.

The restaurants that were planning to expand multiple chains have kept their
expansion plans on hold. Instead, they are focusing on the 5 star hotels in order to
avail the Input Credit Tax.

The revised tax policy has made many restaurants to start an online platform. The
major benefit of online business is that there is no need to pay huge rentals, unlike a
brick-and-mortar restaurant. With the help of digital restaurant management
system such as investor POS, you can easily integrate multiple platforms such as third
party aggregators, websites and more.

There is absolutely no need to worry about the latest GST regime. With the help of a
modern day POS, it is quite easy to reconcile the GST applicable to you.

NEGATIVE IMPACT OF GST ON RESTAURANT BUSINESS

On Five-star Restaurants and Hotels- The high-end restaurants and five-star
properties would be charged a Luxury Tax of a whopping 28%. This comes as a major
blow to the posh restaurants as customers are likely to be deterred from eating out in
such establishments.

On Aerated Drinks- The aerated drinks have been marked by the highest GST slab,
that is, 28%. Currently, the effective Tax cost comes between 20.5% to 26% (VAT
being levied at 14.5% to 20%, plus the Service Tax).

On Complimentary Offers- Currently, complimentary offers are exempted from the

VAT. GST may be levied, thus increasing the costs.

On Liquor- Liquor is essentially imported from outside and falls under the State Tax
and Excise. Thus liquor is outside of GST. The State-wise VAT and Excise Duty
would still be applicable, and the current Tax rate may continue. In light of the GST,
the price of the liquor is likely to shoot up.

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1.9 IMPACT ON RESTAURANTS’ OWNER’S

Restaurant owners have more reason to cheer in the upcoming regime. Under the
current tax regime, restaurant business owners do not get any option to adjust the
output service tax liability with the credit of input VAT on goods consumed.
However, under the new regime both these taxes will get subsumed into GST and thus
irrespective of goods and services, the credit of input will be available for adjustment
against the output liability. This will further optimize the working capital of these
restaurants and in turn, consumers can expect a more superior quality of food and
services. Raw materials can be procured at subsidized rates from agriculturalists and
farmers at a single stroke instead of owners having to negotiate taxes shall remain
uniform throughout states thus making the competition even. The overall cost of
procuring goods will thus decrease substantially, making the restaurant business a
viable and easily manageable venture again.

The foremost and ultimate benefit for the Restaurants’ owners is that they are eligible
to adjust the output tax liability with the credit of input on goods consumed. Presently
they are following VAT Laws and Service Tax Laws and maintaining books and
records, doing havoc compliances under both the laws but post GST they will get few
relaxation from these huge task.

However, one biggest hurdle is still persisting for a restaurant’s owner who is
supplying Alcoholic Liquor as the Alcoholic Liquor for human consumption is out of
the purview of GST and existing state excise duty and VAT/CST will continue on this
liquor which for sure affects the seamless transfer of credits.

Moreover, A Restaurant with a turnover of less than Rs. 50 Lakh can opt for
Composition Scheme where there shall be levied a tax at the rate of 5% but they shall
not be eligible to collect taxes or claim Input Tax Credit. The slab rate for Hotels has
been put 18% maximum in comparison of existing 9% (After abatement) and 28% for
luxury Hotels. Experts say that the proposed system and slab rate will not only affect
the Hotels and Restaurants Industry but also hospitality and tourism industry as well
as employment generation. Hope the Government will come out with some relief and
exemption for Hotels and Restaurants.

22
As far as restaurant owners are concerned, GST is largely a mixed bag. The following
are some of the major implications of GST for the food entrepreneur:

• Seamless flow of ITC

In the previous regime, restaurant owners did not have an option to adjust the output
service tax liability against the input VAT on goods consumed. Since the input credit
from central taxes were not available for set-off against VAT liability and vice versa.
This would lead to the cascading effect of taxes, increasing the costs, and thus hiking
prices for the consumer.

Under GST, both service tax and VAT have been subsumed under GST, and thus,
regardless of goods or services, the credit of input tax will be available for adjustment
against the output liability. This will help optimize the working capital of restaurants
in general, which they will be able to pass on to their customers, in terms of better
prices and better food quality, a positive GST impact on restaurants.

• The headache of serving liquor

Service of liquor in restaurant is not under the GST regime and this is a dampener. In
such a case, restaurants serving alcohol will need to maintain two separate streams of
transactions, which will increase the cost of compliance for restaurant chains. Not
only that, separate bills will need to be provided in case alcohol is consumed – GST
for the food portion, and VAT for the alcohol portion. What is more harrowing is that
different states will continue to have different VAT rates, leading to operational
challenges – definitely a negative GST impact on restaurants.

• Composition scheme – Not enough?

Under the GST regime, restaurants with a turnover of INR 75 lakh or below (INR 50
lakh or below in Special Category States), will be able to avail the composition
scheme. Under this scheme, restaurants will be liable to pay taxes at a flat rate of 5%,
but, they will neither be eligible to collect taxes, nor claim Input Tax Credit.

However, if one compares this to the similar composition scheme in the previous
regime, the benefits have clearly gone down. Under the VAT laws, restaurants not
only enjoyed higher limits of up to INR 1 crores, but also had to pay tax at a lower
rate of 3% – 4% (depending on the state) on the turnover made from cooked food
23
manufactured and sold, without the facility of input tax rebate. Comparing the pre-
GST, and post-GST scenarios, the limit of INR 75 Lakh seems too low to get the real
benefit, and may not have the requisite positive GST impact on hotels.

• Reverse charge nightmare

Generally, restaurants make a lot of supplies from unregistered dealers. Under the
earlier regime of VAT, restaurants in general and small eateries under the
composition scheme in specific were not liable to pay purchase tax on such purchases
made from unregistered vendors.

However, under GST, fortunately or unfortunately, restaurants have been classified as

services, and thus the reverse charge mechanism from the earlier regime has been
adopted in the GST regime as well. Under this reverse charge mechanism, restaurant
owners will need to pay tax at full rate on all taxable supplies from unregistered
persons, which is bound to impact the profitability at some point. However, the daily
limit of INR 5000 is bound to have a somewhat positive GST impact on restaurants,
especially for small ones.

• Going e-commerce a pain

In the GST regime, e-commerce firms will have to deduct tax collected at source
(TCS) at 2% (1% each of CGST and SGST) when they make payments to restaurants
or vendors using their platform. This will obviously disrupt the working capital of
smaller restaurants with lower sales volumes and deter them from going online. While
restaurants will still be able to claim input tax credit and get a refund for the TCS that
they paid, but until that refund arrives, that amount of working capital will remain
blocked.

Thus, it can be assumed that the online aggregator model, which a couple of months
ago were considered to be one of the best platforms for smaller restaurants, vendors
and businesses, will be hit due to TCS. It is possibly due to this, that the government,
has taken cognizance of this problem, and has deferred TCS to a later date. However,
another headache is bound to be the aspect of mandatory GST registration for all
restaurants, which use e-commerce services, irrespective of turnover. That could be a
tax burden many will not be comfortable with, and could have a negative GST impact
on the restaurant.
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1.10 GST BILL ON RESTAURANT
As an end consumer, we hardly pay attention to our food bill in these restaurants and
most of us are not even aware of the components included in it.

First, let us understand the components of the bill:

VAT: This is the tax charged on the food portion of your bill.

Service tax: This is the tax charged on the services provided by the restaurant. [To
avoid unnecessary complications government had already bifurcated the service
portion and food portion and charge taxes accordingly.]

Service Charge: This is a charge applied by the restaurants and not by the
government. THIS IS NOT A TAX. It should not be confused with service tax as this
is an income to the hotels. Service tax is not an income and merely a tax collected
from you and submitted to the government.

However, the rates under GST are vastly different than what you would find before
the tax policy change. Let us look at these changed rates below.

➢ GST RATES ON RESTAURANT SERVICES

Types of restaurants GST rate GST Rate

(Normal (Compositio
Scheme n Scheme)

Standalone restaurants 5% without 5% without

ITC ITC provided
turnover for
Standalone outdoor catering services 5% without the whole FY
ITC does not
exceeds 1.5
Restaurants within hotels (where room tariff is 5% without
crore.
less than Rs 7,500/-) ITC

Normal/composite outdoor catering within 5% without

hotels (where room tariff is less than Rs 7,500/- ITC
)

Restaurants within hotels (where room tariff is 12% with

less than Rs 7,500/-) ITC

25
Restaurants within hotels (where room tariff is 18% with
more than or equal to Rs 7,500) ITC

Normal/composite outdoor catering within 18% with

hotels (where room tariff is more than or equal ITC
to Rs 7,500/-)

Restaurant serving alcohol 18% with

ITC

➢ How the GST Bill Affects the Restaurant Business

The list of taxes in India is a big fat one and not everyone knows what and how much
they are paying for the goods and services they buy. Today, consumers pay a tax on
the total amount of the goods and services, which include:

▪ The cost of the raw material

▪ Tax on raw material
▪ The value added by the manufacturer
▪ Tax paid by the manufacturer
▪ Retailer’s margin of selling the good

Now with the implementation of the GST Bill the manufacturer will have to pay the
GST on the value added by them and the consumer will have to pay the tax only on
the retailer’s margin. It is hoped that the GST will help the consumer understand the
tax implications while easing out the tax process for the retailers and manufacturers.

The GST Bill is a big boon to big traders of the organized sector as they will get a
single market to buy raw materials from any part of the country as the tax will remain
the same.

The GST is sure to help restaurants purchase raw materials at a cheaper rate. The final
bill for the customers is also clutter-free and much easier to understand for the end-
customers, as it only consists of the GST.

A four-tier GST rate structure has been decided where the taxes are levied at multiple
levels, ranging from 5% to 28%. As per the new GST rates, five-star hotels and
restaurants will be charged at 28%. Non-AC restaurants would be charged at 12%,
while AC establishments would be charged at 18%.
26
The new GST rate structure spells good news for the small restaurants and would
have a positive impact on the Cloud-kitchens and food delivery businesses as they
would be charged significantly less than the AC food establishments and high-end
restaurants.

Overall, the impact of the GST Bill on the restaurant industry is expected to be
positive as it would bring in better processes and operations, by ensuring more
transparency in business. The reduced tax levied on the small restaurants would also
propel customers to spend more.

Let’s understand the comparison between pre or post GST on Food Service with an
example-

Before GST on Food Service or restaurants

XYZ Food Corner

Table no.4
Date
Bill No. 123456

Dish Quantity Price

– –
– –
_ –

Total Rs 2000
Service charge @10% 200
Service tax @ 5.6% 123.2
KKC@ 0.2% 4.40
SBC@ 0.2% 4.40
[email protected]% 319

Total amount payable 2651

27
After GST on Food Service on restaurants

XYZ Food Corner

Table No.4
Date
Bill No. 123456
Dish Quantity Price
– –
– –
– –
– –

Total Rs 2000
Service Charge @10% 200
GST @18% 198
– CGST 9% 198
– SGST- 9%

Total amount payable 2596

Under GST, with effective rate of tax @ 5% for restaurant, a customer can easily
save Rs. 55 on a transaction of Rs. 2000. Under the pre GST regime, the total tax
burden on customers was around 20.5% (which includes Service Tax @ 5.6%, Krishi
Kalyan Cess @ 0.2% (5% * 40%), Swachh Bharat Cess@ 0.2% (5% * 40%) & Vat @
14.5%). Thus, under the GST regime, a customer can save 2.5% (20.5-18) of
transactional value per transaction.

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1.11 IMPACT ON CONSUMERS

For Restaurant, Under the current legislation, there is a composite levy of both
Service tax i.e. 6%, as well as, Value Added Tax i.e. 14.5% (Vary from State to State)
on food and beverages served by hotels and restaurants which finally put burden of
20.5% on the pocket of ultimate consumers. However, some relief is there for Non-
AC Restaurants supplying food and beverages, there shall not be levy of service tax
on these restaurants.

Post GST, the scenario shall be completely different. As already it is clarified under
GST Laws and discussed above that supply of food and drinks in a restaurant shall be
treated as a supply of services. Hence, only GST shall be levied on such services @
18% which saves around 3% as compared to above. But around 10% of extra burden
on those people who love dining out at luxury restaurants in 5 stars or above rated
Hotels as such restaurants are in 28% tax bracket.

Further, as compared to earlier there is not any exemption for Non AC Restaurants
and it has to provide 12% tax, but still it is going to be a little bit cheaper or the
situation may be the same in few states which have 12% VAT rates as the element of
VAT (vary from state to state) shall not be there.

Further, staying in a good hotel is going to be very costlier as the rate of tax has been
doubled from 9% to 18%. Even Luxury Hotels of 5 star or above rated charging room
rent Rs. 5,000/- or above will attract 28% tax.

29
1.12 GST EFFECT ON RESTAURANT

The smaller outlets like food courts, dhabas, and coffee bars cater to large segments
of population on daily basis. The maximum people who fall in this business category
earn modest income and thus the new tax format is likely to come under criticism. All
kinds of hotels whether it is AC or non-AC will definitely collect the higher rate and
this will bring an overall price hike in food items.

According to the latest GST update budget, hotels that are charging Rs 1000 per day
for rooms are exempted from taxes. Hotels that are charging Rs 5000 or more room
tariff per day will have to pay 28 per cent GST which is a big threat to country’s
developing tourism and hospitality. Restaurants in such hotels too, will have to pay 28
per cent GST.

Under the current tax regime, restaurant business owners do not get any option to
adjust the output service tax liability with the credit of input VAT on goods
consumed, hence restaurant owners are in no mood to cheer for the GST bill. Price
hike in food can be expected in the upcoming days. If you are very fond of eating
outside, you might now need to check your pockets when you plan on it.

GST ON FOOD ITEMS

The following are the key GST rates applicable to some common food items:

Nil GST on fresh and chilled vegetables including potatoes, onions, garlic, leek etc.
and Nil GST on fresh grapes, fresh/dried coconut, fresh/dried bananas/plantain, fresh
apples, fresh pears, etc.

Nil GST on non-container packed dried leguminous vegetables (shelled) whether

skinned/split or not

Nil GST on meat (not in container whether fresh or chilled)

Nil GST on birds’ eggs in shell (fresh/cooked/preserved)

Nil GST on unsweetened milk (pasteurized/unpasteurized), cream, etc.

Nil GST on container packed vegetables (uncooked/steamed/boiled)

30
Nil GST on vegetables preserved using brine/other means unsuitable for immediate
human consumption

5% GST on meat packed in container bearing registered trademark/brand name

5% GST on birds’ eggs not in shell/egg yolks boiled or cooked by steaming

5% GST on dried leguminous vegetables packed in container bearing registered brand

name (skinned/split or not)

5% GST on ginger (excluding fresh ginger), turmeric (excluding fresh turmeric),

thyme, curry leaves, bay leaves, etc.

5% GST on food such as meal/powder of dried leguminous vegetables

12% GST on vegetables, fruits, nuts and edible plant parts preserved using sugar

12% GST on vegetables, fruits, nuts and edible plant parts that are preserved/prepared
using vinegar/acetic acid.

18% GST on food preparations such as those prepared using flour, malt extract, etc.
containing cocoa less than 40% of total weight.

18% GST on chocolate and other cocoa-based edibles.

31
CHAPTER 2

RESEARCH METHODOLOGY

2.1 OBJECTIVE OF THE STUDY

• To analysis customers perception regarding GST.

• To understand how GST is useful for the people.
• To know the history and formation of GST.
• Studying fluctuating percentage on food.
• To understand the GST tax system to study how the imposition of taxes will
benefit consumers and restaurant owners.
• To know the advantages and disadvantages of GST.
• To understand the concepts of GST and does it affects the restaurant.
• To examine the impact of GST on restaurant food bills.

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2.2 HYPOTHESIS

Hypothesis literally means an idea or theory that the researcher sets as the goal of the
study and examines it and is replaced as a theory when the hypothesis is true in the
study's conclusion.

• Hypothesis is a material thinking based on scientific process.

• Hypothesis is impossible to generate in the absence of human thought.

• Formulation of hypotheses in scientific study of social problems is an important and

strong aspect of research, utility of their use etc.

• Hypothesis gives researcher a new direction in research study.

HO = There is no significant impact of GST on restaurant.

H1 = There is significant impact of GST on restaurant.

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2.3 SCOPE OF THE STUDY

1. The scope of the study is limited out of the overall Tax Structure of India, though
passing references of other taxes appear in the body of text have appeared for
comparison purpose.
2. The study will cover the entire Geographical area of India, wherever the “Goods
& Service Tax” is applicable.
3. The scope of this study will covers a time period from implementation of this tax,
i.e. from 1st July 2017 to till the date of completion of this work
4. This study provides the impact of GST on consumers and restaurant owners.
5. To study provide the information of how much knowledge about GST amongst
restaurant owners and consumers.
6. To know about the perception of consumers for the GST.
7. To know about impact of GST on restaurant because of that there is any profit or
loss for owners.

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2.4 LIMITATIONS OF THE STUDY:

1. Inaccurate data on the internet:

Since a part of the data is dependent on the internet websites, there is a high
possibility of it being inaccurate.

2. Lack of data on the official websites:

The data on the official website was highly insufficient and it was difficult to study
and fill the gaps of information.

3. Geographical limitation:

Here main limitation is geographical limitation because individuals (respondents) are

family, students’ friends and my neighbors. So, Mumbai suburban are taken as
universe in my research study.

4. Lack of data on the official websites:

The data on the official website was highly insufficient and it was difficult to study
and fill the gaps of information.

5. Difficulty in collecting data from Questionnaire:

• There were some respondent did not gave proper response.

• There were many respondents who did not give all answers of question.
• There were facing the problem of shortage of time.
• Chance of bias in the opinion of respond.

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2.5 SELECTION OF THE PROBLEM:

Dominant purpose of the research is to find out and analysis goods and service tax
impact on restaurants. Another purpose of the study is to analyze restaurant’s increase
in India or falls after introduction of GST. The Goods and Service Tax is new for all.
It is based on Canadian GST. Being new and challenging levy for all the stakeholders,
attracted researchers to make the research on this topic.

GST is a single comprehensive tax levied on goods and services consumed in an

economy. It would mainly include union excise duties, customs duties, service tax and
state VAT into a single levy. Introduction of GST is the second major reforms in India
in the area of Indirect Taxes after Value Added Tax in the state in 2005. GST is a
destination based tax and levied at single point at the time of final consumption of
goods or services by ultimate consumers. More than 100 countries across the world
have introduced GST

2.6 SAMPLE SIZE:

A sample size is a part of the population chosen for a survey or experiment in my

research study it is an important feature. In my research study the sample size is the
main goal is to make conclusion through sample. For this study I have taken a
individual (respondent) are students, employees, retired person and businessman as
sampling size. I have collected the 84 responses for my research study

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2.7 SOURCE OF DATA:

1. Primary Data: Primary data is a type of data that is collected by researchers directly
from main sources through interviews, surveys, experiments, etc. Primary data are
usually collected from the source—where the data originally originates from and are
regarded as the best kind of data in research.

2. Secondary Data: Secondary data is the data that has already been collected through
primary sources and made readily available for researchers to use for their own
research. It is a type of data that has already been collected in the past. A researcher
may have collected the data for a particular project, and then made it available to be
used by another researcher. The data may also have been collected for general use
with no specific research purpose like in the case of the national census. A data
classified as secondary for a particular research may be said to be primary for another
research. This is the case when a data is being reused, making it a primary data for the
first research and secondary data for the second research it is being used for.

This project is made from collecting both primary and secondary data. A major part of
the study was primary backed by secondary data in the form of articles and data
available on the websites and reference books. The primary data was collected
through a questionnaire consisting of FIFTEEN questions relating to the topic and the
responses along with collected secondary data were blended to form the project.

37
CHAPTER 3

REVIEW OF LITERATURE

1. Nagarajan T.R.17 (2013)

Opined in his article “Taxation of Hotel Accommodation and Restaurant Services”

that as per the Notification 31/2011 Service Tax, dated 25-04-2011, services by way
of accommodation provided in hotel, inn, guest house, club or camp site for less than
3 months 57 is the taxable service under section 65(105) with a declared tariff rate of
Rs 1,000 or more per day with abatement of 50 per cent, subject to condition that no
input Cen vat credit is availed of an input, capital goods and input services.

The Kerala High Court viewed the levy of service tax as encroaching upon the
legislative power of the Kerala State to tax the luxuries under Entry 62 list II-7th
schedule to the Constitution of India (State list) and held the levy to be beyond the
legislative power of the Parliament. It is doubtful if the Judgment of the Kerala High
Court in Kerala classified Hotels and Resorts Association’s case (supra) is applicable
to the present levy of service tax on renting of immovable property. There appears to
be no legislative encroachment on the State’s right to tax luxury, as defined in List II
Seventh Schedule to the Constitution of India.

State Government alone will have the legislative competence to enact the law
imposing a tax on the service element forming part of sale of goods as well, and
thereby deny the right of the Central Government to tax the services in supply of food
in restaurants or hotels where service part is dominant.

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2. Jonathan and Gabriel (2017)

In this research paper researcher try to examined the Impact of GST in hotel and
restaurants. This study focuses on impact analysis on the restaurant and food industry.
Researchers classified the restaurants on the basis of the food and services they
provide respectively. And accordingly researchers examined the before and after GST
scenario.

Researchers explained how the restaurant bill will look under GST and what will be
the implications for the end customers, the owners and the overall industry. So finally
researchers concluded that companies specializing in food and beverages operations
could be the biggest beneficiaries of GST within the hospitality sector. They further
added that food and beverages bills have multiple components and can inflate the bills
by 30-35% and a single slab tax will benefit consumers and should lead to savings of
10-15% on the overall bill.

3. Sagar Shah’s (2012)

Article “Service Tax on Hotel Industry” attempts to discuss that tax in relation to the
supply services of food in hotel industry has always been a contentious issue whether
under VAT or under Service tax. Further, even accommodation services provided
have been a contentious issue under Luxury tax and now we have an overlapping tax
in the nature of service tax.

As far as service tax is concerned the same has been applicable to the hotel industry
since very long, in relation to the banqueting service and related catering services.
Slowly and steadily the services of air conditioned restaurants serving liquor were
brought to tax and so were accommodation services in a hotel where declared room
tariff exceeds Rs 1000 per day.

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4. K. RahmathNisha, K. MohmedJasim, A. Keerthika (2017)

In this article, we will look at the effects of the new tax on the Hotel industry. Before
the implementation of GST hotel Industry has paid lot of Indirect taxes such as VAT,
Luxury Tax, Service Tax, service charges etc. After GST came into effect all these
taxes ceased to exist. It has both positive and negative impact on hotel industry. This
paper is designed to provide an overview of positive and Negative impact of GST
implementation in Hotels in South Tamil Nadu. Among 300 Hotels and Restaurants in
South Tamil Nadu a random sampling of 256 has been selected. The analysis has
been done using SPSS and Warp PLS5.0. A proposed research model was developed
and the appropriate factors and variables were identified such as Administrative Ease,
Clarity for consumers, Time savings and improved Quality, Technological Burden,
Possibility of Increased cost and Competition.

5. Dr.Manjunath and et. Al (2016)

Conducted a study on, “Customer satisfaction in Fast food industry”. The objective
of the study is to find out the key success factors for fast food industry in region of
Mysore district and its aim is to find out the essential factors or determinants of
customer satisfaction in the restaurant industry of Mysore district.

The findings revealed that the service quality and physical design are the key factors
for satisfaction in fast food industry in Mysore district.

6. Diksha panwar and Sidheswar Patra (2017)

Researcher stares that, dissected the effect of GST on Restaurants and

nourishment administration business in India , the target of the examination was to
discover the experiences in execution and to feature the unfavorable impacts of cafés
and nourishment industry. The investigation presumes that incessant change in charge
rates and backward tax collection strategy disheartens the new contestants in the café
business.

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7. Aswathy et al. (2018)

Researcher focused on A Study on GST and its effect on hotel industry and restaurant.
This study aims to find out the impact of GST on hotel industry and restaurant.
Researchers classified the GST rates on the basis of room rent and then accordingly
examined the impact of GST as per the rates.

This study shows the impact of GST on hotel sector in terms of reduced tax rate,
centralized registration, provision of GST audit, discount and offers policies of hotels
and restaurants should be documented, effect of inward and outward receipts, no
input tax credit on alcohol and electricity as they are out of the preview of GST and
so on.

So finally researchers concluded that companied that focuses on food and beverages
could be the biggest beneficiaries of GST within the hospitality sector and on the
other hand hotels falling under 18-28% GST slab bears the adverse effect of GST.
With that researchers also suggested to reduce the average room rates which will
be beneficial to both hoteliers as well as to the customers.

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CHAPTER 4

DATA ANALYSES AND INTEPRETATION

Analysis is a crucial aspect of research. Analysis is a form of description of data

gathered in a systematic and scientific way. Statistical analysis acts as a quantitative
link for communication of results. This chapter reflects the research approach of data
collection for the present study.

• The data was collected through a survey which contained 14 questions. The
responses to the survey will be studied in the chapter. Accordingly, a study of
responses will be in the form of explanation and bar diagrams and pie charts.

• Due to limited responses only 84 responses were collected and analyzed in this
chapter.

• The participants of the survey were mostly above the age of 20 years, mostly
friends, classmates and neighbors.

• The questionnaire was circulated through social media and email. It took a week to
collect the above-mentioned number of responses.

• This chapter forms part of the primary data collected for the study.

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Question 1: Do you have any idea about GST?

INTERPRETATION: