GoM for 12% GST on AC eateries
New Delhi: The Group of Ministers set up to make GST composition scheme more attractive today suggested lowering tax rates for manufacturers and restaurants under the plan to 1 percent.
At present, while manufacturers pay GST at 2 percent, the rate for restaurants is 5 percent. Traders currently pay 1 percent.
The GoM headed by Assam Finance Minister Himanta Biswa Sarma has also suggested doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under composition scheme and tax them at 12 percent.
It also suggested that hotels which have room tariff of more than Rs 7,500 should attract 18 percent tax rate.
Composition scheme is open for manufacturers, restaurants and traders whose turnover does not exceed Rs 1 crore. This threshold was earlier Rs 75 lakh and the GST Council earlier this month raised it to Rs 1 crore from October 1.
About traders, the GoM suggested a two-pronged approach to taxation under the scheme.
It suggested that traders who want to exclude the sale proceeds of tax-free items from its turnover, it can pay 1 per cent GST. However, those traders who pay tax on total turnover, the tax rate has been proposed at 0.5 percent.
For example, suppose a trader deals in goods which are tax exempt as well as those which are taxable under the GST and has a turnover of Rs 1 crore. Of this, Rs 40 lakh turnover is from the sale of tax-exempt items and remaining Rs 60 lakh from taxable goods.
"The GoM decided that tax rates under composition scheme for restaurants and manufacturers be lowered to 1 percent.
For traders the ministerial group suggested two tax rates," an official said.
The GoM also recommended allowing businesses who are engaged in an inter-state sale to avail the composition scheme, he added.