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Julie Varughese

Spectre of indefinite strike looms large

Mumbai , April 28

It dangles like the Damocles' Sword over Mumbai.

True, the Indian Hotel and Restaurant Association (AHAR) has decided to postpone its indefinite strike to June following "positive signs" from the State Government. But numerous restaurants in Mumbai could still down their shutters come June unless the Government changes its April 1 decision to hike VAT on food items from one per cent to 12.5 per cent.

Alternatives

Faced with the unwelcome prospect of having to fork out tax to the tune of Rs 48,000 against Rs 6,000 till March 31, the hotels are threatening to go on an indefinite strike from June 1. This comes after AHAR staged a one-day token strike on April 19 to draw the Government's attention to the problem.

Mr Jagdish Shetty, General Secretary, AHAR, said, "Around 45 eateries in South Mumbai have shut shop in the past one month unable to bear the steep tax hike." The one-day strike has caused loss worth more than Rs 25 crore.

At present, the tax structure offers two alternatives: an eight per cent tax, to be borne by the restaurant, that cannot be passed on to the customers or a 12.5 per cent VAT, which can be charged from the customer.

The downside to the second option is that small restaurants face the risk of losing business to street hawkers and vendors, say AHAR officials. Therefore, they are demanding a reduced tax rate of 4 per cent from the existing 8 per cent.

According to Mr Prasanna Shetty, owner of Anand Bhavan, a restaurant located in the textile retailing hub at Kalbadevi, the government earlier followed a differential system of tax collection.

Here, those with an annual income ranging from Rs 1 lakh to Rs 6 lakh had to pay a tax of one per cent, while those with a turnover between Rs 7 lakh and Rs 15 lakh were required to pay 2 per cent tax. Those with income above Rs 15 lakh had to pay a tax of 4 per cent.

New problem

The problem is the new tax regime brings small and medium-sized eateries on the same level with five-star restaurants, with VAT on the latter category reduced from 23 per cent to 12.5 per cent.

Clearly, Mumbaikars are faced with the prospect of being passed on the enhanced tax component come June, unless the Government relents on its April 1 decision.

More Stories on : Hotels | Taxation | Maharashtra

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