The Goods and Services Tax (GST) is one riddle that everyone wants to solve. But the moment you get any closer to cracking the code, the rules of the game get shuffled up.
Two days ago, the GST Council brought both AC and Non-AC restaurants under the 5% slab, as opposed to the previous 18% and 12% slabs respectively.
So naturally, cue in lots of hoopla about cheaper restaurant bills and finally some uniformity in restaurant bills, irrespective of air conditioning being a part of the dining experience.
Alas, celebrated too soon.
Unfortunately, pictures of McDonald’s bills before and after GST played party poopers.
A Twitter user shared pictures of two McDonald’s bills, one issued before and the other after the 5% GST rule was implemented. The thing to note is that the total, even after the revised, lowered GST is the same in both bills!
Shame on you @mcdonaldsindia Not passing on GST benefit to customers should be a crime @FinMinIndia Please take action! pic.twitter.com/P9J4gWNxfX
— Amogh Chaphalkar (@chaphya) November 15, 2017
The user, one Amogh Chaphalkar, clarified that the bill wasn’t his, but what mattered was pointing out the blatantly unfair practice. He even tagged Finance Minister Arun Jaitley’s official Twitter handle. Jaitley is the Chairman of the GST Council.
If you’re wondering how this math was possible, take a closer look at the bills again.
As you can see, the price of the item in the first list is Rs. 120.34 + 18% GST.
However, in the second, revised GST bill, the price of the item has been increased to Rs. 135.24 + 5% GST, thus keeping the grand total the same as in the previous bill.
Twitter united in uproar and voiced their displeasure over the unjust practice.
1. Sadly, it is.
@McDonalds India.. Hope this is not true.. pic.twitter.com/55gQEW8R4R
— Jerry Philip Anand (@jerryinbaraj) November 16, 2017
2. Et tu, McDonald’s Noida?
https://twitter.com/dhruvnoida/status/931103670044827648
3. Wasn’t this meant as a relief for the common man?
Classic case of passing it on to the consumer. Why, @mcdonaldsindia ? Even after reducing #GST to 5%, the common man pays the same. #BoycottMcdonalds #notlovinit pic.twitter.com/pGeoJNPhCV
— Shrutika Kalbag Kini (@shrutikakalbag) November 15, 2017
4. Are other restaurants doing it too?
@arunjaitley @McDonalds @McDonaldsCorp @narendramodi @PMOIndia #Arun Jaitly sir u r intention of reduction in GST is not serving the customers..We people stil paying the same amt before & after reduction of GST.if @McDonalds can do it think about other restaurants in India ??. pic.twitter.com/NH3ZsnkAis
— Its me Arun (@arunsoul) November 16, 2017
5. Loot macha rakkhi hai!
@McDonalds India.. Hope this is not true.. pic.twitter.com/55gQEW8R4R
— Jerry Philip Anand (@jerryinbaraj) November 16, 2017
McDonald’s India offered an explanation, citing removal of Input Tax Credit Credit as the reason for the increase in the base price of the products.
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) November 15, 2017
Due to this, our operating costs have gone up. However, keeping customer convenience in mind [2/3]
— McDonald's India (@mcdonaldsindia) November 15, 2017
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) November 15, 2017
For the uninitiated, the input tax credit is a tax offset that restaurants can claim on the raw materials they use in their food against the tax they pay over their finished products. However, the GST Council, in their latest policy, has done away with this benefit.
Thus, to compensate for this loss, restaurants like McDonald’s may have resorted to such a practice.
However, many experts have claimed that while restaurants are likely to increase their menu prices, it does not translate to a higher bill amount. In fact, there is expected to be a marginal drop in the total bill. How? Here’s the math.
Imagine your food bill, with 18% GST, is 2000 units. Then, with 5% GST, they should come down to, say, 1800 units.
But even if restaurants were to increase the prices of the dishes in their menu, the total, with the 5% GST, should still be around 1950 units.
Which, if you see, is still lesser and not the same as the previous bill, unlike McDonald’s.
This point echoed in Twitter users’ clapback to McDonald’s statement.
Safe to say, they weren’t happy with the explanation and wanted their fair billings.
1. Illogical much?
That's the most lousiest explanation I have ever come across! Price to customer should reduce! Price it at 120 and pay 6 rupees tax (5% of 120) to government. Transaction value becomes 126.Instead you are raising price. Complete illogical
— Amogh Chaphalkar (@chaphya) November 15, 2017
2. Illegal and unethical.
So the input credit was 13% of the sale, not true, no one can or should make profits out of taxes, illegal and unethical to say the least @adhia03 @CBEC_India @askGST_GoI @arunjaitley pls take action else this reduction in taxes will not percolate
— Nitesh Jain (@canitesh_jain) November 15, 2017
3. Convenient tactics, these.
When 18% was introduced it was straight away transferred to the consumers but when reduced they adjusted. Cool!!!
They think of doing such malpractice in India because they know nothing happens here.— Channa M (@Channa_M) November 16, 2017
4. Either way, the common man suffers.
@mcdonaldsindia Its foolish to expct input credit benefit as well rate cut wen GST rate was cut drastically IC can't b extended. In fact all eateries wer cheatng customers wen GST was introduced by not passing on credit benefits 2 customers by proportionately reducing prices
— KrishnaBaaluIyer (@IndusSpirit) November 16, 2017
5. Customer’s king no more?
Even wen the input tax credit was there, the customer wasn’t getting any benefit of it so what is the use?
— Mithila (@mithilakulkarni) November 16, 2017
GST has been the thorn in the side of several businesses, majorly because there are still several policies that require clarification and streamlining.
However, if this continues, there is no stopping the public from losing faith in the advantages of GST and actually thinking of it as the Gabbar Singh Tax! And that won’t make for a very happy meal, methinks!