The Impact of GST on Small Eateries: Unveiling the Fairness Debate

The implementation of the Goods and Services Tax (GST) in India has been a topic of heated debate since its inception. While it has simplified the tax structure by subsuming multiple taxes into one, it has also raised concerns about its impact on various sectors, particularly small businesses. One such sector is the small eateries, which have been significantly affected by the GST regime. The shift from tax-inclusive pricing to a separate 12% GST has led to an increase in the final bill amount for customers, sparking a debate on the fairness of this practice.

The Impact of GST on Small Eateries

Before the implementation of GST, small eateries were subjected to a VAT (Value Added Tax) which was included in the price of the food items. However, with the introduction of GST, a flat rate of 5% without Input Tax Credit (ITC) or 12% with ITC is levied. This has led to an increase in the final bill amount, as the tax is now charged separately and not included in the price of the food items.

The Fairness Debate

The shift to a separate GST charge has sparked a debate on its fairness. Customers argue that small eateries should reduce their prices to offset the additional GST, thereby keeping the final bill amount the same. However, small eateries contend that they are unable to reduce their prices due to increased operational costs and the inability to claim ITC on GST paid.

Why are Small Eateries Charging GST?

Small eateries are charging GST as it is a mandatory tax imposed by the government. They are merely collecting it on behalf of the government. The GST paid by customers is not a revenue for the eateries but a liability that they need to pay to the government.

Is it Fair to Charge GST Without Reducing Prices?

The fairness of charging GST without reducing prices is subjective and depends on various factors. From the perspective of small eateries, it is fair as they are already operating on thin margins and any reduction in prices could affect their sustainability. However, from a customer’s perspective, it may seem unfair as the final bill amount has increased without any apparent enhancement in the quality or quantity of the food.


The impact of GST on small eateries and its subsequent effect on customers is a complex issue. While the intent of GST is to simplify the tax structure and increase transparency, its implementation has led to an increase in the final bill amount for customers. The fairness of this practice is subjective and depends on one’s perspective. However, it is important to remember that small eateries are merely complying with the tax laws and any change in the tax structure or rates is in the hands of the government.