Why despite GST cut, eating out at McDonald’s, Burger King, KFC, Pizza Hut & Domino's has not become cheaper

NEW DELHI: Prices at McDonald’s (in the north and east), Burger King, Pizza Hut, Domino’s and KFC have risen in the past week — at least on some of the costlier items on the menu — despite a cut in goods and services tax (GST) on restaurants because input tax credit is no longer available to them. On the other hand, the quick service restaurant (QSR) chains said some items are now cheaper thanks to the tax reduction. The GST Council slashed rates to 5% from 18% for restaurants with effect from November 15.

Increases at McDonald’s (north and east), Burger King, Pizza Hut, Domino’s range from 5% to 8%, while KFC said the rise in price was marginal. This comes as the government has been pushing companies to pass on the benefit of the mid-November GST cuts on various items to lower prices for consumers.

Connaught Plaza Restaurants Ltd (CPRL) managing director Vikram Bakshi said, “The actual impact of non-availability of input taxes after reduction of GST to 5% from 18% was about 8%.” CPRL continues to operate McDonald’s stores in the north and east despite the US chain announcing the termination of its franchisee pact for 169 stores in the region in August.




“After careful deliberation, CPRL has increased prices, effective December 1, to give us an overall 5% increase,” Bakshi said, adding that the breakfast menu and all beverages are unchanged as are items such as the Pizza McPuff.

‘Increase in Input Cost’
Domino’s has raised prices of cakes, garlic bread and some highend pizzas by up to 8% but kept regular pizzas unchanged.

“Since denial of input tax credit has led to an increase in the input cost, we have adjusted prices of a few items to only partially cover this increased cost. However, our customers will now witness a significant reduction in effective prices immediately,” a Jubilant FoodWorks spokesperson said.

The spokesperson said Pizza Mania prices have been cut to Rs 62 from Rs 69, while the basic Margherita is down to Rs 104 from Rs 117. Under its Everyday Value Offer, pizza prices have been reduced to Rs 209 from Rs 235.

KFC has raised the price of some items and cut that of others. KFC India managing director Rahul Shinde said, “Our menu prices have been updated to be inclusive of GST, and going forward our consumers will pay exactly what they see on the menu board.”

A spokesperson for Hardcastle Restaurants, which operates McDonald’s outlets in the west and south, said there had been no increase in prices over the past week. “The government has brought down GST from 18% to 5%, but there has been a removal of input tax credit due to which our operating costs have gone up. We have passed on benefits to consumers wherever we could,” said a Hardcastle spokesperson, adding that it has “‘substantially reduced prices” of flagship products including the Maharaja Mac and spicy chicken and paneer wraps.

“Depending on the category of the restaurant, price adjustment exercise to the base menu price had to be done to rationalise the removal of ITC,” said Rahul Singh, president of the National Restaurants Association of India (NRAI), which represents thousands of outlets. “We welcome reduction in GST slab from a very high 18% to 5% without any distinction of the air-conditioning. However, denying the ITC benefit goes against the grain of GST and will push up the costs by 10%, which will be passed on the menu price. So, effectively the consumer pocket will get a marginal benefit and not as it seems.”

A Tata Starbucks spokesperson said, “Like many businesses operating in India, Tata Starbucks adjusted prices following the recent revision of the GST structure. The GST revision included the elimination of the input tax credit, increasing costs for the industry. As a result, we raised our base prices, while still providing savings for our customers after tax on every product.”

The chief executive of a large global restaurant chain’s India unit said, “While there is a decrease in prices of some value products, the absence of input tax credit (ITC) has led us to take selective price hikes.” He said it was not possible to pass on all of the tax benefit. “For some popular products, we have maintained prices so that it doesn't impact consumer sales.”

Burger King and Pizza Hut didn’t respond to queries.

At last month’s GST Council meeting, the rate was slashed to 5% from 18% for all standalone restaurants, irrespective of whether they were air-conditioned or otherwise, without input tax credit. Takeaways and deliveries were also brought down to a flat slab of 5%. The change took effect November 15.