As India makes way for the global trend of “one nation, one tax”, there is a lot of murmur around on the impact it will have on various businesses, what it means for the end consumer and how does it really work. While it is impossible to know how it will likely change the Indian business dynamics, you can certainly keep yourself well informed. And that’s what we’re here for!
Change can be scary even for the best and bravest if we don’t know what to expect. You probably have the breakdown on what GST will mean for your restaurant business, so why not bank up on some smart tips as you navigate unchartered territory.
Quick bites on GST
Simply put, the State levies several taxes like service tax, luxury tax, SBC, VAT etc. on the current restaurant bill, all of which will be incorporated into a single unified tax under the GST regime.
- Restaurants with a turnover of less than INR. 50 lakh, will be levied a 5% tax rate.
- Non-Ac restaurants will be levied a 12% tax rate.
- Five star restaurants will be levied a 28 % luxury tax rate.
How does GST affect your Restaurant Business?
- It certainly spells additional cost to bring in the new accounting practices to function on the ground, but that’s only the initial jab.
- Capital expenditure could witness a hike, owing to increased cost of capital goods.
- Beverages get hit by a 28% tax rate, which is greeted with no cheers!
- It makes us lose some tourism business to other Asian countries by making us more expensive in comparison to China, Singapore or Malaysia. *(source: http://www.caclubindia.com/articles/impact-of-gst-on-hotel-restaurant-sector--29757.asp)
But fear not, there are still reasons to cheer with the new tax regime in place. And here’s why:
- Multiple taxation can currently inflate a restaurant bill by up to 35%, a single tax structure shall be much lower.
- Uniformity of taxes keeps competition even, as raw material procurement costs shall be cheaper across state lines.
- The alcoholic and aerated beverage sector will be under the States control with better and efficient logistics & distribution, a relief from dual administrative control.
- Better utilization of input credit is foreseen.
- Edible Oil, Tea, Coffee, Food Grains & Spices will be cheaper, bringing the overall food cost down.
Our prognosis is that it isn’t all bad. There is talk of costs going up and business getting affected and most experts are asking us to wait & watch. But we have a few proactive tips for you.
- Bringing down your food cost, which is your highest expense to within 35% of your total operating budget, will ease tiding over the initial impact.
- The tax benefits coming your way can be passed on to your customers to reduce inflation in bills, till the dust settles.
- Automate and maximize your resources by bringing in smart technology solutions that help with customer retention and cost cutting. You can do this by having an overview of your restaurant’s peak performance on smart technology platforms, that will help you not only assess your lean days and plan better but will also give you an overview of what works best in your restaurant.
- Engaging with customers with relevant offers and deals may make all the difference to your business when the apprehension is high during the initial days. Deploy a smart campaigning technology to help you tide through the initial confusion, as it engages with your customers for you.
Other things for you to consider includes better resource planning, tighter inventory checks and of course upping the ante on customer experience from start to finish. In the long run, the experience delivered is what will ultimately differentiate your business in the market, GST regime notwithstanding. Because a happy customer is likely to be a loyal one too!