Economy

Starbucks may face fine for not reducing prices after GST rate cut, says report

Updated : March 15, 2019 11:47 AM IST

The authorities had reduced GST for restaurants from 18 percent to 5 percent last year.

The US-based retailer operates over 100 stores in India through Tata Starbucks, a joint venture with Tata Group.

Popular coffee chain brand Starbucks could face a penalty from authorities for not reducing product prices even after the government reduced the goods and services tax, reported The Economic Times. The development comes after the coffee chain provided the detailed list of its prices and costs to National Anti-profiteering Authority (NAA) when authorities questioned and issued letters to it seeking details about its pricing, according to the report.

The authorities had reduced GST for restaurants from 18 percent to 5 percent last year. However, this meant that the restaurants could not claim input tax credits and taxes paid on raw materials could not be set off against future tax liabilities, the report added.

As per the report, the US-based retailer that operates over 100 stores in India through Tata Starbucks, a joint venture with Tata Group argued that the denial of input tax credits had neutralized the cut in GST and thus its operational costs were not impacted.

While no comments were available in the report from the retailer, several experts highlighted the act that the recent GST changes are not a cakewalk for the restaurants.