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20.07.2017

We’re overwhelmed by the number of medu vada breakfast bills you’ve posted on Facebook and Twitter this month. Following the Goods & Services Tax implementation, the cost of eating out has fluctuated. Bars have dithered between charging two kinds of tax (and been seen to charge both!) on alcohol; your local tea stall is wrangling taxes for the first time in their life; and your firm’s accounts department still doesn’t know if they can claim rebates on that bill you expensed for a business meeting. “Why don’t date a girl after GST,” young men now advise each other.

Don’t put the kibosh on your social life, reader. We asked a dozen bars and restaurants in Mumbai, Delhi and Bangalore to suss out the changes to their bills pre- and post-GST and figure out some of the finer points of the situation. We quickly ran into a dozen different scenarios, but the clearest run-down of the situation we can give you is this: If your bill amounts haven’t reduced already, it’s likely that they will come down slightly over the next couple of months. Here’s how things are changing:

 

Your Breakfast

Then: Affordable. Now: By and large more expensive. Later: May get cheaper.

Bills at many smaller establishments rose in the first days of the GST regime. The medu vada crisis appears to have been the result of a combination of factors. One: your local breakfast place has an A/C section, in which case the establishment must levy 18% GST on all their bills, including in non-A/C rooms. Two: Their prices were tax-inclusive before July 1 but not revised to reflect changes. Three: Their previous tax slab allowed them to charge you less before July 1.

Many an idli has gone beyond the pale, but others are working to survive the crisis. At non A/C, self-service Upahara Darshini on Residency Road in Bangalore, taxes on food used to amount to less than 12% of listed prices; menu prices were all-inclusive. Now required to levy 12% GST, they’ve decided to absorb the cost on most items until the end of September, by which time their accounts team will have worked out details.

Many managers told us that GST returns will start to tell on items further down their supply chains later in the year. If this means they can produce food more cheaply, they may pass the benefits on to you. In the meanwhile, only “the price of the lunch thali has gone up by Rs 5 and tea and coffee costs two rupees more” at Upahara.

At Mumbai’s beloved Café Madras, long used to listing all-inclusive prices, the menu now shows lower prices - and the bill a 12% GST surcharge (we know you know this, but GST charges are broken up evenly into CGST and SGST to show the 50-50 split between central and state dues). “A plate of idli used to cost Rs 40 and now costs Rs 38,” Devavrath Kamat, whose family owns Café Madras, explains. It may cost Rs 2.50 more altogether - not so painful to look at, though.

Your Booze

Then: VAT-dependent. Now: Still VAT-ted. Later: You’ll be drunk.

Drinking has escaped the mire of confusion for now, since alcohol isn’t GST-able. At Ek Bar in Delhi you pay 20% VAT on your Old Delhi Sour, same as always. “The service tax is no longer applicable, though,” manager Neeraj Soman points out, “so that knocks six percent off the total.” On drinks worth Rs 1,000, therefore, you’ll now pay Rs 1200 instead of Rs 1260 --congratulations!

On drinks worth Rs 1,000, you’ll now pay Rs 1200 instead of Rs 1260 --congratulations!

At bars, the GST on food items stands at 18%, as it does in all establishments that are air-conditioned and/or serve alcohol. At places like Scottish Pub on St Marks Road in Bangalore, you can get a beer at 4% VAT and grub at 12% GST - because Scottish Pub has neither air-conditioning nor hard liquor. What a sweet spot.

Your Dinner

Then: Taxes were almost 20% of your bill. Now: By and large, very slightly cheaper. Later: May get cheaper still.

At places such as Delhi’s Rustom’s Parsi Bhonu, 18% isn’t a heart-attack inducing tax amount: with VAT, service tax and the Swachch Bharat and Krishi Kalyan cesses, your bill pre-GST was tagged with 18.5% tax - “so the customer actually gets a 0.5% rebate,” Rustom’s boss Kainaz Contractor explains. “Your bill is definitely cleaner and more concise.” Also, it is cheaper for you to drink a soda with your berry pulao indoors, instead of picking it up at a store: soft drinks are now charged 28% GST, but restaurants serving it to you can do so at 18% GST.

But the difference in how you’re billed isn’t even about the sort of bar or restaurant you’re frequenting; it may have to do with how your restaurant structured taxes and passed on the benefits to you before GST came into play. Gauri Devidayal of The Table, Mumbai, sends us a helpful table of the food and drinks break-up at her establishment to illustrate this:

Pre GST (Food & Soft bevs): Bill before tax – 1,000. Service tax @ 6% - 60. Total  – 1,060.

Post GST (Food & Soft bevs): Bill before tax – 1,000. CGST @ 9% - 90. SGST @ 9% - 90. Total – 1,180.

Pre GST (Alcohol): Bill before tax – 1,000. Service tax @ 6% - 60. VAT @ 5% - 50. Total – 1,100.

Post GST (Alcohol): Bill before tax – 1,000. VAT @ 5% - 50. Total – 1,050.

So what happens down the line? Food suppliers and infrastructure providers will have adjusted their prices according to their own GST requirements. Restaurants that aren’t currently clear on their input tax credits (the rebates they can claim on raw materials and items that were taxed on purchase) will know more about how much they owe the government. And almost across the board, accountants say, their output tax liability, or dues, are likely to come down - which means they can, if they so choose, lower their prices to make things easier on you.

Just remember to tip your server no matter what.

PS. “Cooking at home is not taxed,” Union minister Nirmala Sitharaman will remind you if you carp about the changes. Ordering in, however, has become more expensive: previously taxed at 12.5%, you now pay 18% GST. Restock that fridge tonight?

Image credit: Instagram / ticktckaccounting

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