Please Read Clarification at the end of Article by Mcdonald in respect of Below Story.
Nowadays Social media is abuzz with a Photo showing two bills of Mcdonald’s Family Restaurant in which Price inclusive of Tax of one of the item sold by it is shown as same on 15th November 2017 i.e. the date on which GST on Restaurants been reduced to 5% from earlier 18% and on the date prior to reduction in GST Rate. As per the image Mcdonald has adjusted the price of item in such a way that benefit of GST is not been passed to the Customer. We are reproducing below the copy of bill issued by MCdonald as circulating on Social Media. Please note we have not verified the genuineness of these bills so we can not comment on genuineness of these bills.
BJP MP Kirit Samaiya has taken a note of the same and twitted on his twitter handle that he Met Senior Officials at Delhi of Finance Ministry & Consumer Ministry requested GOI to ask/take action against Restaurants not passing on benefits of GST reduction of 18% to 5% to Consumers. He also Submitted proof of MacDonald & Starbucks.
We are reproducing below the Text of letter written by him:-
Dr. Kirit Somaiya, MP. Chartered Accountant, Ph.D
Dated: 16 November 2017
KS-DEL-GST-RESTAUTRANT/2017
Respected Sir,
Sub: Passing of GST benefits to the ultimate customers — reduction of GST for food in restaurants.
We once again thanks the Government for reducing 18%/12% GST to 5% on the food items at restaurants.
- On the first day of execution i.e. 15th November 2017, some restaurants in Mumbai are found passing the benefit to the customers e.g. if earlier the bill was Rs. 100, 12 to 18% GST was charged and the customer was required to pay Rs. 112 or Rs. 118. Now those restaurant have added 5% GST and customer was yesterday asked to pay Rs. 105 instead of Rs. 112 or Rs. 118
- But there are several restaurants who are indulged into malpractices, upto 14.11.17 they are charging 18/12% GST on the food bill of Rs. 100 now they have increased the prices of the items yesterday i.e. on 15.11.17 and added 5% GST, ultimately the customer is compelled to pay Rs.118 (or Rs.112) as he was paying upto 14.11.17.
- I am enclosing herewith copies of two bills of restaurants of Mumbai where the net amount is same upto 14.11.17 and on 15.11.17
- From these bills one can observe that these restaurants have manipulated the prices/increase the MPR of the food items and once again rendered the total bill amount same.
Request to please check and take appropriate steps so that the ultimate benefit of reduction of GST may be passed on to the customers.
Thanking you.
Yours sincerely,
(Dr. Kirit Somaiya)
Shri Arun Jaitely
Hon’ble Minster of Finance
Government of India
North Block
New Delhi.
Download Copy of letter Issued by Dr. Kirit Somaiya, MP. Chartered Accountant, Ph.D
Clarification mailed to us by Harcastle Restaurants Pvt Ltd (Mcdonald Group)
GST for restaurants has come down from 18% to 5%, but Input Tax Credit has been withdrawn. Due to this, our operating costs have gone up by 10-12%.
After taking this cost into account, the effective tax benefit would have been less than a percent. As a result, the prices of most of our products would have come down very marginally and this would not have made much difference to our customers.
We have taken the BOLD move of a BIG reduction in the prices of some of our flagship products including
- Big Spicy Chicken Wrap
- Big Spicy Paneer Wrap
- Chicken Maharaja Mac
- Veg Maharaja Mac
We have delighted our customers by reducing our prices by Rs 40-50.
Like, the Maharaja Mac that was earlier priced at Rs 191 has been brought down to Rs 149, making the burger more affordable to all our customers.
We have always been open about our prices. Our menu board prices are inclusive of taxes. So, “What You See Is What You Pay”.
Author Bio
Before the 23rd council meeting, there were speculations that the Govt. would reduce the tax rate on Restaurant services from 18% to 12% and that too without giving benefit of ITC. And now, when the rate has been slashed to 5% , even though without ITC, these businesses are taking a plea that even though rates have been reduced , but their costs have increased due to non availability of ITC and therefore the customer’s money outgo will remain the same.
This is totally ridiculous on their part, where they have increased their product prices, instead of giving reduction benefits to their customers.
Govt. is required to take strictest action against them.
Mc Donald has cleverly avoided confirming whether the bill which is displayed is a Fake or correct.
They are going around by saying that they have passed the benefits.
Readers, pl remember that before reduction of GST rates on restaurant foods, hotels and restaurants ware getting input tax credit on the purchases of inputs.
Govt has reduced GST rate from 18% / 12% to 5%. 18% rate was for AC, but many hotels without AC ware charging GST @ 18% . Here customer was charged 6% more.
As the hotel keepers are not getting input tax credit, the GST cost will be loaded in selling rate.
If there is any decrease in rates, it will be marginal and people will see hike in rates in near future.
how the input tax credit (with ITC before and without ITC now) impact these sectors
Restaurants and some other items where the GST rates are reduced shop owners do not pass on the benefit to the ultimate consumers. The tactics is similar.
http://toi.in/7zM8db/a28fj
TIMESOFINDIA.COM | Updated: Nov 17, 2017, 12:11 IST
NEW DELHI: If you have an elephant’s memory or are in the habit of keeping old bills, you may have realised that even after the government slashed GST (goods and services tax) rate on eateries to 5 per cent from 18 per cent , the GST cut may not reflect in your restaurant bill , at least at some restaurants.
After the new GST rate came into effect from Wednesday, some consumers took to social media to complain that despite the rate cut, the total bill amount remains same as before+ . One such customer was outraged that the fast food restaurant chain McDonald’s India was not passing on the ‘benefit’+ of the GST cut to customers and took to micro-blogging site Twitter to complain.
Shame on you @mcdonaldsindia Not passing on GST benefit to customers should be a crime @FinMinIndia Please take act… https://t.co/rvyIPYQAqn
— Amogh Chaphalkar (@chaphya) 1510754925000
The consumer also put up a picture comparing an old bill with a new one, to show that McDonald’s had raised its prices, as can be seen in the tweet
However, McDonald’s India was quick to respond from its official Twitter handle, saying that despite the cut in GST, operating costs have gone up up due to removal of input tax credit. They further clarified that the change in prices have been affected keeping in mind that the customers pay the same amount as before.
@chaphya The Government has brought down GST from 18% to 5%, but there has been a removal of Input Tax Credit.[1/3]
— McDonald’s India (@mcdonaldsindia) 1510755254000
@chaphya Due to this, our operating costs have gone up. However, keeping customer convenience in mind [2/3]
— McDonald’s India (@mcdonaldsindia) 1510755269000
@chaphya we have structured the changes in such a manner that total amount paid by the customer remains the same. [3/3]
McDonald’s India (@mcdonaldsindia) 1510755277000
To recap, on November 10, the GST Council decided to slash rates on restaurants to a flat 5 per cent from the previous 12 and 18 per cent for non-AC and AC restaurants respectively. But at the same time, it decided to take away the benefit of input tax credit for restaurants with an annual revenue of Rs 1 crore or more as they were not passing on the benefit of lower tax incidence to consumers. “Since they (restaurants) did not pass on the benefit they are not entitled to the benefit (any longer),” finance minister Arun Jaitley had said.
Input tax credit refers to a situation where a manufacturer pays the tax on his output, he/she can deduct the tax previously paid on the input he/she purchased.Following the government’s decision, restaurant bodies had expressed displeasure saying it would add to their burden. “We welcome the reduction in tax rates. But without the benefit of input tax credit (ITC), input costs will remain high and we will have to bear the burden. We request the government to give us ITC benefit like any other business,” K Syama Raju, president of South India Hotels and Restaurant Association, had said.
The action taken is appreciable and such restaurants be asked to explain reasons for increasing initial rates of items unlawfully. The exemption granted by Govt. is for the public and not for owners. They are source to collect tax on behalf of Govt. and not to grab such exemptions.
This rule is erliyest composes in india then meeting
Asambliy says gst 18% to 5% but resturents
onwers is not applicable to yet
I really appreciate you for bringing this in knowledge of the Government and common people.
I wish Government notice the same and issue some notification to stop such malpractices my these restaurants.