Anti-Profiteering Rules (GST)

In simple terms, these rules say that if the government reduces GST rates on restaurant services, you must pass those savings on to your customers by lowering your menu prices. You can’t pocket the difference!

For example, when GST on restaurants was reduced from 18% to 5% in 2017, restaurants were required to lower their prices accordingly. If you didn’t, you could be found non-compliant and face penalties.

Let’s say you previously charged ₹100 + 18% GST = ₹118 for a dish.
After the GST rate is reduced to 5%, you have two options:

1. Compliant: Charge ₹100 + 5% GST = ₹105
2. Non-compliant: Sneakily raise your base price to ₹112.38 + 5% GST = ₹118 (keeping the final price the same)

The second approach could get you in trouble with the National Anti-Profiteering Authority (NAA).

If customers complain or authorities investigate, you could face:

• Monetary penalties up to 10% of the profiteered amount
• Having to refund the profiteered amount to customers
• Cancellation of GST registration in extreme cases
• Damage to your restaurant’s reputation

In 2018, a popular quick-service restaurant chain was found guilty of profiteering ₹7.49 crores after the GST rate reduction. They were ordered to reduce prices and refund the amount to customers!

Read more about Industry Trends!

• Document your pricing calculations before and after any GST rate changes
• Clearly communicate price changes to customers through updated menus and signage
• Keep records of input tax credits received and how they affect your pricing
• Review your pricing strategy whenever there’s a GST rate change
• When in doubt, consult a tax professional familiar with restaurant operations

Remember, anti-profiteering rules are designed to ensure GST benefits reach the end consumer, your diners. Staying compliant not only keeps you legally safe but also builds trust with your customers when they see you passing tax benefits along to them.