From 26/02/2018

B.Arulmani
II M.Com
Thiruvalluvar University Constituent Arts and Science College
Kallakurichi-606213, Villupuram District
e-mail: barulmani17101996@gmail.com
Mobile:9965723771.

Through
Dr.S.Indira
Assistant Professor of Commerce
Thiruvalluvar University Constituent Arts and Science College
Kallakurichi-606213, Villupuram District

To

The Member Secretary

Tamil Nadu State Council for Higher Education
Kamarajar Salai
Wellington College Campus
Chennai- 600 005.

Respected Sir

Sub: Submission of project –Reg

I herewith submit the Student Mini Project entitled “Impact of GST on

Restaurant Consumer of Chennai City” for your kind perusal.

Thanking You

Yours faithfully

Enclosures:

1. One hard copy of Project

2. One Soft copy of Project
3. Statement of Expenditure
IMPACT OF GOODS AND SERVICES TAX (GST)
ON RESTAURANT CONSUMERS OF
CHENNAI CITY

A Project Submitted to the Thiruvalluvar University

for the partial fulfillment for the award of degree of

MASTER OF COMMERCE

Submitted by
B.ARULMANI (Reg. No. 44116P09004)

Under the Guidance of

Dr. S. INDIRA Ph.D.,

Funded by
Tamilnadu State Council for Higher Secondary Education
(TANSCHE)

Submitted to

POST GRADUATE DEPARTMENT OF COMMERCE

Thiruvalluvar University Constituent Arts and Science College
Kallakurichi – 606213
Villupuram District.
February – 2018
Dr.S.Indira
Assistant Professor of Commerce
Thiruvalluvar University Constituent Arts and Science College
Kallakurichi – 606213
Villupuram District.

CERTIFICATE

This is to certify that the project entitled “IMPACT OF GOODS AND

SERVICES (GST) ON RESTAURANT CONSUMERS OF CHENNAI

CITY” submitted to the Thiruvalluvar University, Vellore, (Funded by

TANSCHE Students’ Mini Project Scheme) in partial fulfilment of the

requirements for the award of the Degree of “MASTER OF COMMERCE”

is a record of original research work done by B.Arulmani (Reg.No.

44116P09004) during the period 2017-18 of his study in the Post Graduate

Department of Commerce, Thiruvalluvar University Constituent Arts and

Science College, Kallakurichi - 606213, under my supervision and guidance

and the project has not formed the basis for the award of any Degree /

Diploma / Associateship / Fellowship or other similar title of any candidate of

any University.

Head of the Department Signature of Guide

Principal
 DECLARATION

I B.ARULMANI (Reg.No. 44116P09004) , hereby declare that the

project entitled, “IMPACT OF GOODS AND SERVICES (GST) ON

RESTAURANT CONSUMERS OF CHENNAI CITY” submitted to the

Thiruvalluvar University, Vellore, in partial fulfilment of the requirements for

the award of the degree of MASTER OF COMMERCE is a record of original

and independent research work done by me during 2017-2018 under the

supervision and guidance of Dr.S.INDIRA Ph.D., Assistant Professor, Post

Graduate Department of Commerce, Thiruvalluvar University Constituent

Arts and Science College, Kallakurichi - 606213, and it has not formed the

basis for the award of any Degree / Diploma / Associateship / Fellowship or

other similar title to any candidate in any University.

Place: Kallakurichi

Date :26.02.2018

Signature of the Candidate

(B.Arulmani)
 ACKNOWLEDGEMENT

First of all, I wish to thank the Almighty for his gracious blessings he

has shown on me.

Next, I place my sincere thanks to my Dr.K.Murugan D.Sc.,

Honourable Vice Chancellor, Thiruvalluvar University, Vellore,

Dr.V.Peruvalluthi Registrar (i/c) and Dean, College Development Council,

Dr.B.Senthilkumar Controller of Examinations (i/c), Thiruvalluvar

University, Vellore for permitting me to undertake this project in our college.

I am greatly obliged to thank Dr.S. Mohandass Ph.D., Principal (i/c),

Thiruvalluvar University Constituent Arts and Science College, Kallakurichi -

606213, who deserves many credits for supporting us in all our educational

endeavor.

My sincere and heartfull thanks to my guide Dr.S.INDIRA Ph.D.,

Assistant Professor, Post Graduate Department of Commerce,

Thiruvalluvar University Constituent Arts and Science College, Kallakurichi -

606213, for her constant and continuous guidance of expertise in the process

of shaping this project.

I also wish to thank Dr.P.Veeralakshmi Ph.D., Head, and

Dr.R.Manimurugan, Assistant Professor, Post Graduate Department of

Commerce, Thiruvalluvar University Constituent Arts and Science College,

Kallakurichi - 606213, and all the Faculty members of our college, who had

assisted me in one way or the other.

 I am extremely thankful to Tamilnadu State Council for Higher

Education (TANSCHE) for providing financial grant to undertake this project.

I owe my gratitude to my father P.Balakrishnan and my mother B.Valli,

family members, friends and all the good hearts who worked for me directly

and indirectly in completing this project. I thank everyone.

B.Arulmani
 CONTENTS

CHAPTER PAGE
TITLE
NO. NO.
LIST OF TABLES

LIST OF CHARTS

INTRODUCTION AND DESIGN OF THE

I 1
STUDY

CONCEPTUAL STUDY ON GOODS AND

II 7
SERVICES TAX (GST)

III PROFILE OF CHENNAI 13

ANALYSIS OF IMPACT OF GST ON

IV 15
RESTAURANT CONSUMERS

SUMMARY OF FINDINGS, SUGGESTIONS

V 31
AND CONCLUSION

APPENDIX

Questionnaire

BIBLIOGRAPHY
 LIST OF TABLES

TABLE PAGE
PARTICULARS
NO. NO.

2.1 Comparisons of GST with VAT and Service Tax 11

4.1 Demographic Profile of the Sample Respondents 15

4.2 Frequency of Visits to Restaurants in a Week 17

4.3 Monthly Expenditure in Restaurants 19

4.4 Consumption Items in Restaurants (Multiple Choices) 20

4.5 Reasons for Dining out 21

4.6 Reasons for Preference for this Particular Restaurant 22

4.7 Impact of GST on Prices of Restaurant Bills 23

4.8 Extent of Influence of GST 24

4.9 Impact of GST on spending pattern in Restaurants 25

4.10 Extent of Influence of GST on Restaurant spending pattern 26

4.11 Changes in attitude of consumers after GST 27

4.12 Support for GST 29

4.13 Reasons for not supporting GST 29

 LIST OF FIGURES

CHART PAGE
NO. PARTICULARS NO.

2.1 Categories of Business Units liable to file GST 10

4.1 Frequency of Visits to Restaurants in a Week 18

4.2 Monthly Expenditure ( ) in Restaurants 20

 Chapter I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

‘Hospitality’ plays an important role in Indian culture. People often be

motivated to go out and dine along with family, friends and relatives as part of

party, leisure, inability to cook, or may be tourists. Whatever be the reason, the

craze and craving for restaurant/ hotel food is common among delicious eaters.

Raising middle class income and increasing disposable income has continued to

support the development of such units on one hand. While on the other side,

‘‘Tourism” industry also significantly contributes for the development of

hospitality sector. Similarly, the ‘Ministry of Road Transport and Highways

department’ has to be appreciated in promotion of tourism and hospitality sectors.

They are keen in encouraging stand alone restaurants and hotels in the highway so

as to favour local and tourists.

The Food service sector contributes approximately 2.3 percent of the total

GDP. The largest segments of customers who eat in restaurants are professionals/

job goers in the age group of 21 to 30 years, consuming 30% of their monthly

expenditure. There are consumers who eat out only when offers, discounts, loyalty

memberships are made1.

However, the implementation of biggest tax reform – Goods and Services

Tax (GST) on 1st April 2017 has its direct or indirect impact on restaurant. Under

1
The changing face of the Indian Food service industry, Food Safety Helpline.com, April 14 2015.

1
the GST system, the restaurants are broadly classified into two: as AC and non-

AC restaurants. There is sharp jump in tax rates compared with VAT and service

tax that makes the regular and non-regular restaurant consumers to be more tax

averse.

It is undoubtedly clear that GST to some extent has its impact on restaurant

industry. This comes as a major blow to customers who likely to be deterred from

eating out in restaurants. This study will clearly help to identify the influence of

GST on the eating pattern of consumers, proportionate monthly expenses they

incur from their pockets and their attitude towards ‘dine out’ after implementation

of GST.

1.2 SIGNIFICANCE OF THE STUDY

Rapid urbanization, western lifestyle, increasing women workforce, high

disposable income are few factors that contributed for the growth of restaurant

industry. It is a common sight to find queues waiting in most of the restaurants

during weekends. The survey conducted by National Restaurant Association of

India (NRAI) 2013 India Food Service Report disclosed that the current size of

Indian food service industry is Rs.247682 crores and is projected to grow to

Rs.408040 by 2018 at the rate of 11%. This growth is to be fueled by the growth

of the great Indian middle class.

Three months since its execution, it becomes imperative to analyse the

impact of GST on Restaurant and Hospitality Industry. Hence this study.

2
1.3 STATEMENT OF THE PROBLEM

The implementation of GST by Indian Government to eradicate corruption

and add transparency, had created both positive and negative impact on restaurant

/ hotel sector. Prior to introduction of GST, the restaurant sector is imposed with

tax in different forms as VAT, Service Tax and Cess in some cases. For example,

if the total restaurant bill is Rs.100, then service tax is charged at 15% only on

40% of the total bill amount, meaning 6% service tax. VAT is applicable on the

remaining 60% of bill amount. While under GST, the entire bill amount is taxed,

leading to increase in restaurant bill.

The irresponsible speech by Union Minister Nirmala Sitharaman stating

that there is no tax on people who are cooking and eating at homes, highlights

the impact of GST on hotel bills and thereby indirectly accepting the fact that GST

leads to sharp rise in bill amount.

Compared with other cities, the people in metropolitan, whether middle or

high income group, least bothers to spend money by involving themselves in

leisure activities. Weekly visit to hotels along with family or eating regularly in

hotels due to job, tourists vists are few reasons the survival of food and beverages

industry in metropolitan cities. But now, there is a hue and cry all across the

country that the execution of GST will hit the restaurant sector.

Previously, people who bothers less about tax, have started observing the

tax rate after GST. Hence this study aims at finding out the whether the

introduction of GST discourages people from eating out. If so, the extent of its

impact has also been analysed.

3
1.4 OBJECTIVES OF THE STUDY

The main objectives of the study are:

1. To find out the factors that influence consumers to dine out in restaurant.

2. To compare and analyse the consuming habits of restaurant-eaters prior

and post implementation of GST.

3. To evaluate the impact of GST on consumers spending pattern in

restaurants and on their monthly expenses.

4. To bring out the valid suggestions based on the findings of the study.

1.5 RESEARCH METHODOLOGY

1.5.1 Area of the study

The area considered for the study is Chennai city.

1.5.2 Period of the study

The period of the study is three months, of which one month is to be spent for

collecting the primary data.

1.5.3 Sample size

The sample size selected for the study is 75.

1.5.4 Sampling method

Simple Random sampling method is adopted for selection of sample respondents.

The restaurants near Chennai central, Egmore railway station, T.Nagar, Guindy,

4
Koyambedu Bus stand are considered. The data will be collected from the

consumers who come out of restaurants after finishing their food.

1.5.5 Collection of primary data

Questionnaire is employed for collecting the primary data. Questionnaire has

been framed in a simplified manner after having consultation with subject experts,

reference materials and municipality office information. The secondary data is to

be collected from various journals, magazines, newspaper, websites and published

sources.

1.5.6 Tools for analysis

The statistical tools proposed to be used for analyzing the collected data are:

1. Percentage analysis

2. Paired sample ‘t’ test and

3. Mean Ranking.

1.6 LIMITATIONS OF THE STUDY

The following are considered to be the limitations of the present day.

1. The study is applicable to Chennai city alone

2. The respondents replied to the questionnaire on their memories and

observations and not on any written records and

3. Due to time constraints, the sample size is limited to 75 only.

5
1.7 CHAPTER SCHEME

The study classifies the chapter into five as:

1. The first chapter deals with the introduction, significance, statement of

the problem and objectives of the study.

2. The second chapter gives a conceptual background about the study theme

like introduction, features and highlights of Goods and Services Tax. The

influence of GST on restaurant industry are also analysed in depth.

3. The third chapter presents the profile of the study area i.e., Chennai city.

4. The fourth chapter analyse the impact of Goods and Services Tax (GST)

on restaurant consumers based on the data collected through questionnaire.

and

5. The fifth chapter highlights the key findings of the study, provides

suggestions for the policy makers and brings out the conclusion of the

study.

6
 Chapter II

CONCEPTUAL STUDY ON GOODS AND SERVICES TAX (GST)

This chapter presents the conceptual background on Goods and Services

Tax (GST) for securing knowledge about the study theme. The origin,

background, features, issues and challenges of GST are discussed in brief.

Similarly, the impact of GST on restaurant industry is also studied.

Goods and Services Tax (GST)

Goods and Services Tax (GST) refers to the tax structure that replaces the

entire indirect taxes of Indian economy. Indirect taxes like excise duty, customs

duty, sales tax, VAT, entertainment tax, service tax etc had been replaced with

single tax ‘GST’. GST is applicable on ‘supply’ of goods or services as against the

earlier concept of tax on the manufacture/sale/export/import/services provisions.

Origin of GST

The idea of moving towards the GST was first mooted by the then Union

Finance Minister in his Budget for 2006-07. Initially, it was proposed that GST

would be introduced from 1st April, 2010. The Empowered Committee of State

Finance Ministers (EC) which had formulated the design of State VAT was

requested to come up with a roadmap and arrangement for the GST. Joint

Working Groups of officials having representatives of the States as well as the

7
Centre were set up to examine different aspects of the GST and draw up reports

specifically on exemptions and thresholds, taxation of services and taxation of

inter-State supplies. Based on planning within and between it and the Central

Government, the EC released its First Discussion Paper (FDP) on GST in

November, 2009. This state out the features of GST and has formed the basis for

discussion between the Centre and the States so far.

Constitution of Amendment Act, 2016

The Constitution (122nd Amendment) Bill was introduced in the 16th Lok

Sabha on 19.12.2014. The Bill provided for a charge of GST on supply of all

goods or services except for Alcohol for human consumption. A Goods and

Services Tax Council (GSTC) shall be constituted comprising the Union Finance

Minister, the Minister of State (Revenue) and the State Finance Ministers to

propose on the GST rate, exemption and thresholds, and other aspects. The

Constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The

Bill was referred to the Select Committee of Rajya Sabha on 12.05.2015. The

Select Committee had submitted its Report on the Bill on 22.07.2015. The Bill

with certain amendments was finally passed in the Rajya Sabha and thereafter by

Lok Sabha in August, 2016. Further the bill had been ratified by required number

of States and received assent of the President on 8th September, 2016 and has

since been enacted as Constitution (101st Amendment) Act, 2016

8
GST Tax Slabs:

There would be four major tax rates namely 5%, 12%, 18% and 28%. The

tax rates for different goods and services have been finalized. Rate for precious

metals is an exception to ‘four-tax slab-rule’ and the same has been fixed at 3%. A

cess over the peak rate of GST @ 28% on certain specified luxury and demerit

goods, like tobacco and tobacco products, pan masala, aerated waters, motor

vehicles, would be imposed for a period of five years to compensate States for any

revenue loss on account of implementation of GST.

Nature of GST

GST is levied in three forms: Centre, State and Integrated GST. The GST

to be levied by the Centre is called Central GST (CGST) and that is levied by the

States [including Union territories with legislature] is called State GST (SGST).

Union territories without legislature levy Union Territory GST (UTGST). An

Integrated GST (IGST) is levied on inter-State supply (including stock transfers)

of goods or services. This is collected by the Centre so that the credit chain is not

disrupted.

Who has to file GST Return?

Those business units whose turnover are less than 20 lakhs are exempted to

file GST. For special category States enumerated in article 279A of the

Constitution, exemption limit has been fixed at Rs. 0 lakh. Composition threshold

shall be Rs. 75 lakh. Composition scheme shall not be available to inter-State

suppliers, service providers (except restaurant service) and specified category of

manufacturers.
9
 Figure 2.1

Categories of Business Units liable to File GST

Benefits of GST on Business:

(i) Simple tax regime;

(ii) Reductions in the multiplicity of taxes leading to simplification and

uniformity;

(iii) Reduction in compliance costs –

(iv)Simplified and automated procedures for various processes such as

registration, returns, refunds, tax payments, etc;

(v) Online filing through GSTN portal, hence so less public interface between the

taxpayer and the tax administration;

(vi) Certainty in payment of tax

(vii) Timelines to be provided for important activities like obtaining registration,

10
 LIST OF FIGURES

CHART PAGE
NO. PARTICULARS NO.

2.1 Categories of Business Units liable to file GST 10

4.1 Frequency of Visits to Restaurants in a Week 18

4.2 Monthly Expenditure ( ) in Restaurants 20

 The restaurants got input tax credit, a facility to set off tax paid on inputs

with final tax. The restaurants do not pass on the Input Tax Credit (ITC) to

customers and hence the ITC facility is withdrawn and a uniform 5% tax is levied

on all restaurants without the distinction between AC or non-AC. However,

restaurants in starred hotels that charge Rs.7500 or more per day room tariff will

be levied 18% GST but ITC is allowed for them. Those restaurants that charges

less than Rs.7500 room tariff will charge 5% GST will not get ITC.

The GST council further pruned the list of items in 28% GST slab to just

50 from current 228. The luxury and sin goods alone are now in tax bracket and

items of daily use are shifted to 18% bracket.

12
 Chapter I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

‘Hospitality’ plays an important role in Indian culture. People often be

motivated to go out and dine along with family, friends and relatives as part of

party, leisure, inability to cook, or may be tourists. Whatever be the reason, the

craze and craving for restaurant/ hotel food is common among delicious eaters.

Raising middle class income and increasing disposable income has continued to

support the development of such units on one hand. While on the other side,

‘‘Tourism” industry also significantly contributes for the development of

hospitality sector. Similarly, the ‘Ministry of Road Transport and Highways

department’ has to be appreciated in promotion of tourism and hospitality sectors.

They are keen in encouraging stand alone restaurants and hotels in the highway so

as to favour local and tourists.

The Food service sector contributes approximately 2.3 percent of the total

GDP. The largest segments of customers who eat in restaurants are professionals/

job goers in the age group of 21 to 30 years, consuming 30% of their monthly

expenditure. There are consumers who eat out only when offers, discounts, loyalty

memberships are made1.

However, the implementation of biggest tax reform – Goods and Services

Tax (GST) on 1st April 2017 has its direct or indirect impact on restaurant. Under

1
The changing face of the Indian Food service industry, Food Safety Helpline.com, April 14 2015.

1
Educational and Hospital Hub

Numerous educational and hospitals are established in Chennai. It has

world class educational and medical facilities provided by both the Government

run and Private run hospitals.

Business establishments in Chennai

Chennai is the automobile capital of India. It is also referred to as the

Detroit of South Asia. The 350 old city now is a big commercial and industrial

centre, has a broad industrial base in automobiles, computer, technology,

hardware manufacturing and health care sectors. As of 2012, this city is India’s

second largest exporter of information technology and business process

outsourcing services.

Industrialization

Industrialization of Chennai dates back to the 16th century when textile

mills manufactured goods which were exported to British during their period.

Cement industry, Steel, Metal, information technology, computer hardware etc.

Cultural and Tourists Heritage

Chennai is known as the cultural capital of south India. According to a survey, it

is the third most visited tourists visited city because of its various cultural and

tourists heritage spots.

All these helps Chennai city for the promotion of food and restaurant

industry in Chennai.
14
 Chapter IV

ANALYSIS OF IMPACT OF GST ON RESTAURANT CONSUMERS

The data collected from the restaurant consumers of Chennai city through

Questionnaire from 75 respondents are subject to analysis using the statistical

tools namely percentage analysis, paired sample ‘t’ test and mean ranking method.

This chapter presents the analysis of collected data.

4.1 ANALYSIS OF DEMOGRAPHIC PROFILE OF THE RESPONDENTS-

Percentage Analysis

The demographic profile of the restaurant consumers namely age, gender,

educational qualification, occupation, marital status, family type, family members,

monthly income are anlaysed using the statistical tool - percentage analysis.

Table 4.1

Demographic Profile of the Sample Respondents

Demographic No. of
Classification Percentage
Profile Respondents
Below 20 years 24 32.0
20 – 40 years 37 49.3
Age 41-60 years 11 14.7
Above 60 years 03 4.0
Total 75 100
Male 54 72
Gender Female 21 28
Total 75 100

15
1.4 OBJECTIVES OF THE STUDY

The main objectives of the study are:

1. To find out the factors that influence consumers to dine out in restaurant.

2. To compare and analyse the consuming habits of restaurant-eaters prior

and post implementation of GST.

3. To evaluate the impact of GST on consumers spending pattern in

restaurants and on their monthly expenses.

4. To bring out the valid suggestions based on the findings of the study.

1.5 RESEARCH METHODOLOGY

1.5.1 Area of the study

The area considered for the study is Chennai city.

1.5.2 Period of the study

The period of the study is three months, of which one month is to be spent for

collecting the primary data.

1.5.3 Sample size

The sample size selected for the study is 75.

1.5.4 Sampling method

Simple Random sampling method is adopted for selection of sample respondents.

The restaurants near Chennai central, Egmore railway station, T.Nagar, Guindy,

4
Koyambedu Bus stand are considered. The data will be collected from the

consumers who come out of restaurants after finishing their food.

1.5.5 Collection of primary data

Questionnaire is employed for collecting the primary data. Questionnaire has

been framed in a simplified manner after having consultation with subject experts,

reference materials and municipality office information. The secondary data is to

be collected from various journals, magazines, newspaper, websites and published

sources.

1.5.6 Tools for analysis

The statistical tools proposed to be used for analyzing the collected data are:

1. Percentage analysis

2. Paired sample ‘t’ test and

3. Mean Ranking.

1.6 LIMITATIONS OF THE STUDY

The following are considered to be the limitations of the present day.

1. The study is applicable to Chennai city alone

2. The respondents replied to the questionnaire on their memories and

observations and not on any written records and

3. Due to time constraints, the sample size is limited to 75 only.

5
1.7 CHAPTER SCHEME

The study classifies the chapter into five as:

1. The first chapter deals with the introduction, significance, statement of

the problem and objectives of the study.

2. The second chapter gives a conceptual background about the study theme

like introduction, features and highlights of Goods and Services Tax. The

influence of GST on restaurant industry are also analysed in depth.

3. The third chapter presents the profile of the study area i.e., Chennai city.

4. The fourth chapter analyse the impact of Goods and Services Tax (GST)

on restaurant consumers based on the data collected through questionnaire.

and

5. The fifth chapter highlights the key findings of the study, provides

suggestions for the policy makers and brings out the conclusion of the

study.

6
GST Tax Slabs:

There would be four major tax rates namely 5%, 12%, 18% and 28%. The

tax rates for different goods and services have been finalized. Rate for precious

metals is an exception to ‘four-tax slab-rule’ and the same has been fixed at 3%. A

cess over the peak rate of GST @ 28% on certain specified luxury and demerit

goods, like tobacco and tobacco products, pan masala, aerated waters, motor

vehicles, would be imposed for a period of five years to compensate States for any

revenue loss on account of implementation of GST.

Nature of GST

GST is levied in three forms: Centre, State and Integrated GST. The GST

to be levied by the Centre is called Central GST (CGST) and that is levied by the

States [including Union territories with legislature] is called State GST (SGST).

Union territories without legislature levy Union Territory GST (UTGST). An

Integrated GST (IGST) is levied on inter-State supply (including stock transfers)

of goods or services. This is collected by the Centre so that the credit chain is not

disrupted.

Who has to file GST Return?

Those business units whose turnover are less than 20 lakhs are exempted to

file GST. For special category States enumerated in article 279A of the

Constitution, exemption limit has been fixed at Rs. 0 lakh. Composition threshold

shall be Rs. 75 lakh. Composition scheme shall not be available to inter-State

suppliers, service providers (except restaurant service) and specified category of

manufacturers.
9
 Figure 2.1

Categories of Business Units liable to File GST

Benefits of GST on Business:

(i) Simple tax regime;

(ii) Reductions in the multiplicity of taxes leading to simplification and

uniformity;

(iii) Reduction in compliance costs –

(iv)Simplified and automated procedures for various processes such as

registration, returns, refunds, tax payments, etc;

(v) Online filing through GSTN portal, hence so less public interface between the

taxpayer and the tax administration;

(vi) Certainty in payment of tax

(vii) Timelines to be provided for important activities like obtaining registration,

10
 refunds, etc; and

(vii) transparency and accountable.

Input Tax Credit

Input Tax credit (ITC) can be availed during inward supply of goods

/services/both if the same are used for business.

2.2 GST FOR RESTAURANTS

At the time of introduction, 12% GST on food bill is levied in non-AC

restaurants and 18% in air-conditioned ones. The following table shows the

comparison of GST with VAT and Service Tax.

Table 2.1

Comparison of GST with VAT and Service Tax

Nature of Restaurants* GST (in %) VAT & Service Tax (in %)

AC Restaurants 18 10.6

Non AC Restaurants 12 6

5-Star Hotels 28 20.5-26

*Restaurants with Rs.50 Lakhs or below turnover go under 5%

compositions

11
 The restaurants got input tax credit, a facility to set off tax paid on inputs

with final tax. The restaurants do not pass on the Input Tax Credit (ITC) to

customers and hence the ITC facility is withdrawn and a uniform 5% tax is levied

on all restaurants without the distinction between AC or non-AC. However,

restaurants in starred hotels that charge Rs.7500 or more per day room tariff will

be levied 18% GST but ITC is allowed for them. Those restaurants that charges

less than Rs.7500 room tariff will charge 5% GST will not get ITC.

The GST council further pruned the list of items in 28% GST slab to just

50 from current 228. The luxury and sin goods alone are now in tax bracket and

items of daily use are shifted to 18% bracket.

12
 Chapter III

PROFILE OF CHENNAI

The area selected for the study to analyse the impact of GST on restaurant

consumers is Chennai City. This chapter aims at analyzing the profile of Chennai

city, for better understanding of the study region.

Origin of Chennai

Chennai, previously known as Madras, is the capital city of Tamilnadu. It

was founded in 1661 by the East India Company of the British. It ranks second

among Indian metropolitan city centeres with 90.33% literacy rate. It became

capital of Madras state in 1947 and later renamed as Tamilnadu in 1968. It has a

population of almost 7 million people, accommodating almost 10% of all of the

people in the state live in Chennai region.

Population of Chennai

According to the 2011 Indian census, it is the fifth-largest city and fourth-

most populous urban agglomeration in India. The city is the 36th-largest urban

area by population in the world. Chennai is among the most visited Indian cities

by foreign tourists. Chennai attracts 45 percent of health tourists visiting India,

and 30 to 40 percent of domestic health tourists. The city had a population of

4,646,732, of which 61.5% were from other parts of the state, 33.8% were from

rest of India and 3.7% were from outside the country.

13
 The table 4.7 limelight’s ‘p’ value is significant at 1% level. Hence it can

be stated that imposition of Goods and Services Tax (GST) on restaurants had

significantly increased the prices of foods items.

Extent of GST influence on prices of food items

Table 4.8

Extent of Influence of GST

No. of
Extent of influence Percentage
Respondents
Slightly 25 40.98
Moderately 17 27.87
Very highly 19 31.15
Total 61 100

It can be stated through the above table that 40.98% of the respondents felt

slight increase in the prices of foods items of restaurants, while 27.87% of them

felt it to be moderate and 31.15% to be very high.

Thus, majority of the restaurant consumers felt slight increase in the prices

of foods price after implementation of GST.

4.4.2 IMPACT OF GST ON SPENDING PATTERN IN RESTAURANTS

The impact of Goods and Services Tax (GST) on the spending pattern

of restaurant consumers are analysed with the help of Paired Sample‘t’ test.

24
Ho: There is no significant difference in the spending pattern of restaurant

consumers before and after the implementation of GST.

Table 4.9

Impact of GST on spending pattern in Restaurants

Impact of GST on
Mean SD t-value Sig.
spending pattern

Yes .7467 .46770

4.464 .000**
No .2800 .45202

** - significant at 1% level

The above table limelights the fact that ‘p’ value is significant at 1%

level, hence it can be concluded that imposition of Goods and Services Tax (GST)

on restaurants had significantly affected the spending pattern of sample restaurant

consumers.

Extent of GST influence on spending pattern of Restaurant consumers

The researcher attempts to find out that with those consumers who feel

that the GST had affected their spending pattern, whether their dine out habits

had increased, decreased or remains the same.

25
Educational and Hospital Hub

Numerous educational and hospitals are established in Chennai. It has

world class educational and medical facilities provided by both the Government

run and Private run hospitals.

Business establishments in Chennai

Chennai is the automobile capital of India. It is also referred to as the

Detroit of South Asia. The 350 old city now is a big commercial and industrial

centre, has a broad industrial base in automobiles, computer, technology,

hardware manufacturing and health care sectors. As of 2012, this city is India’s

second largest exporter of information technology and business process

outsourcing services.

Industrialization

Industrialization of Chennai dates back to the 16th century when textile

mills manufactured goods which were exported to British during their period.

Cement industry, Steel, Metal, information technology, computer hardware etc.

Cultural and Tourists Heritage

Chennai is known as the cultural capital of south India. According to a survey, it

is the third most visited tourists visited city because of its various cultural and

tourists heritage spots.

All these helps Chennai city for the promotion of food and restaurant

industry in Chennai.
14
the level of change in attitude of restaurant consumers after implementation of

GST. The results are presented in Table 4.11.

Table 4.11

Changes in attitude of consumers after GST

S.No Changes in attitude Agree Neutral Disagree

1 Prefer small/roadside/platform
hotels 61.3 25.3 13.3
2 Frequency of visits to hotels
reduced 66.7 17.4 16
3 Avoided ‘dining with family’ 40
in restaurants 29.4 30.6
4 Switched to mess 36 42.6 21.3
5 Reduced quantity of food
consumption 45.3 36 18.7
6 Tax aversion 41.4 41.4 17.3
7 Prefer Non A/c dining rooms
to reduce cost 45.3 34.7 20
8 Make online order for door
delivery 36 38.7 25.3
9 During travel, I started
packing my food 52 26.7 21.3
10 Minimized Business/friends
party 37.3 40 22.7
Mean 45.07 33.34 21.59

27
 It can be interpreted from the above analysis that 61.3% of the consumers

registered that they started preferring roadside/platform hotels after

implementation of GST. 66.7% have reduced their frequency of visits to

consumers, while 40% disagreed the concept their ‘dining with family’ has

reduced. While 36% switched to mess, 45.3% have reduced their quantity of food

consumption in restaurants. 45.3% have started preferring non-a/c restaurants

compared with A/C to reduce costs, while 36% switched to online order for door

delivery.

The study also pinpoints the fact that 41.4% of consumers agree that they

are averse towards tax. 52% of consumers have started packing food during travel

and 37.3% have minimized their business/friends party after implementation of

GST.

The mean score obtained shows that 45.07% of the consumers agree that

their attitude had changed after implementation of GST, 33.34% are netural, while

21.59% disagree their change in attitude.

To put in nutshell, the study registers the fact that majority of the

restaurant consumers’ attitude had changed after implementation of GST.

4.6 SUPPORT OF GST FOR RESTAURANTS

A question of general in nature is being asked to sample restaurant consumers of

Chennai city as do they support GST for restaurants.

28
 Table 4.12

Support for GST

No. of
Support for GST Percentage
Respondents
Yes 28 37.3
No 47 62.7
Total 75 100

It can be interpreted from the above table that 62.7% of the consumers do

not support GST for restaurants, while only 37.3% have supported it.

4.6.1 REASONS FOR NOT SUPPORTING GST FOR RESTAURANTS

The reasons behind not supporting GST for restaurants have been found

out and presented in Table 4.13.

Table 4.13

Reasons for not supporting GST

Support for GST Percentage

proportion of ‘take home’
45.3
salary decreased
savings reduced 42.7
negative impact on tourism
21.3
industry
negative impact on hospitality
28.0
industry

29
 The table 4.13 shows that the primary reason for not supporting GST to

restaurants is that 45.3% feels that the proportion of ‘take home’ salary decreased,

42.7% opines that their savings has reduced. While 28% states that GST on

restaurant creates negative impact on hospitality industry, 21.3% states it to be on

tourism industry.

The key reason for supporting GST for restaurant is that it reduces the

consumers take home salary.

30
 Chapter V

SUMMARY OF FINDINGS, SUGGESTIONS AND

CONCLUSION

MAJOR FINDINGS OF THE STUDY

1. Out of 75 restaurant consumers surveyed, majority (49.3%) of the respondents are

in the age group of 20-40 years and are male (72%).

2. Most of the consumers are with UG educational qualifications. The interesting

fact is that only 8% are illiterates.

3. Majority of the restaurant consumers are private employees (29.3%) followed by

unemployed (18.7%) and businessmen (17.3%).

4. Unmarried respondents dine out (61.3%) more compared with married. Similarly,

those living in nuclear family (40%) and single (34.7%) prefer restaurants.

5. Those family with below 3 earning members came out to restaurant (41.4%) and

their monthly earnings are below Rs.10,000 (54.7%).

6. The study finds out that majority of respondents visits restaurants on need based.

30.7% registered as only once in a week.

7. Highest (53.3%) number of consumers spends below Rs.2000 for restaurants and

followed equally by Rs.2000-5000(22.7%) and Rs.5000-10,000 (21.3%) group.

8. Among 75 consumers surveyed, 44% visits restaurants for having meals followed

by breakfast and dinner.

31
9. While analyzing the reasons for dining out, 46.7% stated that they visit restaurants

to have entertainment with family, 28% stated as local citizens, while 14.7%

reported as business party.

10. The reasons for preference of a particular restaurant had been analysed using

mean ranking. The first and foremost reason for preferring a particular restaurant

is „Price‟ followed by „hygiene‟ and „less/no tax‟. The parameter „availability of

preferred items‟ is least ranked. This shows that more customers are particular

about price and tax levied in restaurant.

11. The paired sample „t‟ test finds significant difference in the prices of food items

charged in restaurant before and after implementation of GST. 40.98% of the

consumers feel it as slight variation, while 31.15% considered it to be very high.

12. Similarly, significant difference is also found in the spending pattern of

restaurant consumers before and after implementation of GST. While 52.54% of

them stated that the amount spent in restaurant had decreased, 33.89% stated as it

remains the same.

13. The interesting part of analysis is that 66.7% have reduced their frequency of

visits to hotels, while 36% switched to mess, 45.3% reduced the quantity of food

consumption and 45.3% have started preferring Non A/C restaurants to reduce

cost. 52% have started packing foods during travel and 61.3% have preferred

small/roadside/platform hotels.

14. The convincing part is that even after implementation of GST, the sample

respondents have not avoided ‘dining with family’ that occasionally happens.

This agrees with the fact that „Humans are social animals‟.
32
 The table 4.1 shows that among the data collected from 75 restaurant

consumers, 49.3% are in the age group of 20-40 years and are male (72%).

Majority of them have UG (45.3%) as their educational qualification, and works

for private concern (29.3%). Comparatively with married respondents, unmarried

(61.3%) consumes more in restaurants. Similarly, those living in nuclear family

(40%) followed by living single (34.7%) eats in high number at restaurant. The

respondents who have earning family members below 3 (41.4%) feel free to

consume restaurants. Majority of the respondents (54.7%) have monthly income

below Rs.10,000 followed by Rs.10,000-25,000 (32%).

4.2 ANALYSIS OF RESTAURANT VISITING HABITS OF CONSUMERS

The restaurant visiting habits of consumers like their frequency of visits,

purpose of visits, nature etc has been analysed using percentage and presented in

the following tables.

Table 4.2

Frequency of Visits to Restaurants in a Week

Visiting Frequencies in a No. of

Percentage
week Respondents
Daily 10 13.3
Once 23 30.7
Twice/thrice 15 20.0
Need based 27 36.0
Total 75 100.0

17
 The Table 4.2 shows that 36% of consumers visits restaurant on need-

based only. 30.7% of them visit atleast once in a week, followed by 20% of them

who visits twice/thrice in a week. Only 13.3% of them have the habit of

consuming food in restaurant daily.

The study thus registers that majority of respondents visits restaurants

based on their needs. Chart 4.1 makes the pictorial representation of frequency of

visits to restaurants by the consumers in a week.

Figure 4.1

Frequency of Visits to Restaurants in a Week

18
Cabinet Minister, Nirmala Sitaraman, „people starts eating at home‟ for which

they need not pay GST.

Thus, this project submits the report on the food consumption habits of

chennaites in restaurants after the introduction of GST. This study helps to

highlight the opportunities and challenges faced by the Restaurant industry,

thereby helping the policy-makers to redraft/ amend necessary changes for

sustainable growth. It should be remembered that GST on Restaurant Industry will

have direct impact on other primary sectors like „Tourism and Hospitality‟,

“National highway development” , India‟s foreign exchange generation and also

in the GDP of India.

******

35
 IMPACT OF GOOD AND SERVICES TAX (GST) ON RESTAURANT
CONSUMERS OF CHENNAI CITY
Questionnaire
I. Personal data:
Name :

1. Age : a) Below 20 yrs b) 20-40 yrs

c) 41-60 yrs d) Above 60 yrs

2. Gender : a) Male b) Female

3. Educational Qualification:a) Illiterate b) School level

c) UG d) PG

4. Occupation : a) Students b) Unemployed

c) Businessmen d) Govt. employee
e) Private employee f) Home-maker

5. Marital status : a) Married b) Unmarried

6. Family type : a) Joint b) Nuclear c) Single

7. Number of earning family members: a) Below 3 b) 3 to 5

c) Above 5

8. Monthly income ( ) : a) Below 10,000 b) 10,000-25000

c) 25000-50000 d) Above 50000

II. Restaurant visiting information:

9. Your frequency of visit to restaurant in a week:
a) Daily b) Once c) Twice/thrice d) Need based

10. Monthly Expenditure for restaurants ( ):

a) Below 2000 b) 2000-5000 c) 5000-10000 d) Above 10000
11. What do you have usually in a day in hotel (multiple choices)
a) Breakfast b) Meals c) Dinner d) Tea/Coffee

1
12. State the reasons for dining out in restaurant now:
a) Local citizens
b) Entertainment with family
c) Business party
d) Tourists
e) Others, Specify…………………

13. Rank the reasons for preferring this restaurant:

S.No Reasons Rank
1 Taste
2 Price
3 Atmosphere like cleanliness, songs etc
4 Services
5 Hygiene
6 Availability of preferred items
7 Parking facilities
8 Children’s Park
9 Restroom facilities
10 Less/No tax

III. Impact of GST

14. Do you think GST on restaurants had increased the prices of food items?
a) Yes b) No

14. i) If Yes,
a) slightly b) moderately c) very highly

15. Do you feel GST had affected your spending pattern in restaurant?
a) Yes b) No

15.i) If Yes, dining at hotels

a) remains the same b) decreased c) increased

2
16. Please tick your attitude after implementation of GST for restaurants?
SA - Strongly Agree; A-Agree; N-Neutral; DA-Disagree; SDA – Strongly Disagree
S.No Variables SA A N SDA DA
1o Prefer small/roadside/platform hotels
2 Frequency of visits to hotels reduced
3 Avoided ‘dining with family’ in restaurants
4 Switched to mess
5 Reduced quantity of food consumption
6 Tax aversion
7 Prefer Non A/c dining rooms to reduce cost
8 Make online order for door delivery
9 During travel, I started packing my food
10 Minimized Business/friends party

17. Do you support GST for restaurants?

a) Yes b) No

17. i) If No, why? (multiple choices)

a) proportion of ‘take home’ salary decreased
b) savings reduced
c) negative impact on tourism industry
d) negative impact on hospitality industry

18. Your expectation from Government ……………………………………………..

………………………………………………………………………………

******

3
 BIBLIOGRAPHY

Books

1. Nitya Tax Associates, Basics of GST, Taxmann Publisher, August 2016.

2. S.S. Gupta, GST Law & Practice, Amazon India, 2017.

3. Vishishtha Chaudhary, Ashu Datma, Shaifaly Girdharwal, GST – A Practical

approach”, Third Education Publisher, July 2017.

Journals

1. Bella Jaisinghani, Indian Food service industry worth Rs.2.47 lakh crore, says

National Restaurant Association of India Report”, The Time of India, May 18 2013.

2. Raman Chona, GST effect: How GST will impact your restaurant bill starting

tomorrow”, July 6 2017.

3. Sivakumar.B, Traders charging GST above MRP, Sunday Times of India, Chennai

Edition, September 10 2017.

Published Sources

1. Model GST Law, Empowered Committee of State Finance Ministers, June 2016.

Web-sites

1. www.wikipedia.com/chennai city

2. www.nrai.org