GST Council, the apex indirect tax body of the country, set up a board which passed a decision on Sunday stating that there is a possibility of breaking the wall of discrepancy which exists between air-conditioned and non-air-conditioned restaurants and bringing both of them under the same tax bracket of 12 percent. The panel consisting of five ministers concluded that 18 percent tax levy would be applicable only on those AC restaurants which are located in five star and above rated hotels. The main intention behind taxing AC restaurants at a higher rate was the underlying assumption that they sell amenities along with food. “There is consensus that there is no need for a distinction between AC and non-AC restaurants. It can only create confusion,” said a member of the panel.

However, the final decision pertaining to this will be taken by the GST Council at its next meeting on November 9th in Guwahati. “There has been a convergence on views that the GST rates on restaurants should get lowered. In fact, there is a view that in this age, we should not differentiate between AC and non-AC restaurants,” said another member of the panel.

Prashant Deshpande, the partner at Deloitte India, said, “It is a logical and rational move. In a value added tax system, there is no need for distinction in rate of tax for various classes of the same service as the same tax rate will yield the exchequer higher tax revenue wherever value addition is high.”

The panel is yet to decide if the AC restaurants would be charged at 12 percent GST with or without the benefits of tax rebates. Under the new indirect tax regime, these entities are entitled to rebates for the taxes being paid by them on the numerous items which they purchase throughout the route of their business. However, numerous instances came in front of the authorities wherein the restaurants weren’t passing on the benefits of rebates to the end customers. But it is yet to be scrutinized if denying the input tax credit will be in sync with the structure of GST.