Get ready to shell out extra buck for that pizza

NEW DELHI: With the Budget announcing over 12% service tax on renting of commercial properties, your burgers, pizzas, and coffee are set to cost more. While Cafe Coffee Day is likely to raise prices between 10% and 20% from April, McDonald’s, Pizza Hut, and Domino’s agree that the consumer would have to share the burden with the retailer.

“We are going to hike prices by 10-20%, one of the steepest price hikes we’ve effected in recent times. Not only are we going to pay this service tax, our suppliers, who use rented premises, have also said they will pass on their increased cost to us,” said Cafe Coffee Day director Naresh Malhotra.

Other food and beverage (F&B) retailers are not ready to announce any price hike yet. However, they agree the consumer would feel the impact too. “We’re still studying its impact. We already operate within thin margins and there is no way we will be able to absorb all of this additional tax,” said McDonald’s India (north and east) MD and joint venture partner Vikram Bakshi.

Industry associations have also started lobbying with the government to gain respite from the tax. “Through the Federation of Hotels and Restaurant Associations of India, we are trying to get our point across to the government that it can’t levy service tax when we are already paying such high rentals. No retailer can absorb the tax without passing it on to the consumer,” said Devyani International CEO Virag Joshi. Devyani International is the master franchisee for Pizza Hut, KFC and Costa Coffee in India.

“These are early days yet. We’re trying to address the issues through industry bodies, but if it stays, our bottom lines would be impacted and it will find its way to the consumer in some time. However, we have not taken a stand on the issue right now,” said Ajay Kaul, CEO, Domino’s Pizza, Indian subcontinent.