Why Chapatis Zero-Tax, But Idlis, Dosas 5%? Hoteliers Question GST Parity

The recent revamp of Goods and Services Tax (GST), hailed as GST 2.0, has sparked confusion and frustration among hoteliers and restaurant associations, particularly in South India. While the government exempted plain rotis, chapatis, ready-made parottas and parathas (earlier taxed at 18%), along with paneer, UHT milk and pizza bread, iconic South Indian staples like idli and dosa have been left out.

According to The Hindu, hoteliers are puzzled over the selective exemption. The announcement, which states that "Indian rotis, including parathas, will not attract any tax," has raised questions about why idli, dosa, puttu and idiyappam continue to attract GST.

"We have to wait for the amendment. We cannot depend on the press release since it is not very clear. It is confusing. Changes can still be made. There are similar confusions like in the case of bricket fuel and fire wood," The Hindu quoted a GST expert as saying.

A hotelier told the English daily that the exemption might apply only to packet rotis and parathas sold as commodities in stores, while food served in restaurants would still attract GST.

Tamil Nadu Hotels Association president M Venkadasubbu added that the lack of input tax credit (ITC) remains a bigger problem. "Sweet and savouries manufacturers have been provided the credit. Similarly, the request to reduce GST on commercial cooking gas seems to have been overlooked," he said.

Meanwhile, DT Next reported sharper criticism from restaurant owners and associations in Chennai, who allege discrimination in the government's approach. "There is partiality in leaving idlis and dosas out of the list," said a Chennai restaurant owner. "For the families here, these are daily meals, just like chapati in the North. Why should they be treated differently? And when batter itself is taxed 18%, it becomes even harder for small outlets that rely on it."

M Ravi, president of the Chennai Hotel Association, expressed disappointment: "We genuinely thought idli and dosa would be moved to nil GST this time. Instead, nothing changed." He also questioned the logic of cutting taxes for other products while ignoring regional staples. "When you can cut the tax for pizza dough, why can't you do the same for the staple food of the South?" he asked.

The association also flagged the burden of dual taxation. While restaurants charge 5% GST on idlis and dosas at the counter, packaged batter attracts 18%, leaving small eateries no choice but to pass on costs to customers. Because restaurants under the 5% slab cannot claim ITC, taxes on raw materials, rent, and utilities remain unadjusted.