ZENITH International Journal of Business Economics & Management Research
Year : 2018, Volume : 8, Issue : 2
First page : ( 100) Last page : ( 107)
Online ISSN : 2249-8826.

Spill and spin over effect of GST on consumers decision process in restaurants-A study conducted among Bengaluru residents

Babagnanakumar P

Kristujayanti College, Bengaluru

Online published on 13 February, 2018.

Abstract

The GST council of India has divided the restaurant into two categories: AC restaurant and Non-AC restaurant. The GST charges vary for two categories are 18% and 12% respectively for AC restaurant and Non-AC restaurant. Due to cascading effect in raw materials, Restaurants increase the total cost of food items in restaurant by 6% after the GST announcement. In this context we undertook the study to find out the spin over effect of GST in consumption pattern and spillover effect on change over to AC restaurants to Non-AC restaurants. A survey among 1000 respondents coming to restaurants having both AC and Non-AC category has been selected by snow-ball sampling. After the reliability tests only 912 responses are validated. The primary data have analyzed with Threshold Vector Error correction model to find out the spill and spin over effects. The result indicates that one fourth of the consumers switch over from AC restaurants to Non-AC restaurants. The spin of effect between changes in food stuffs consumption and changes in consumers created is 18%. This indicates that due increase in food charges, 18% of the consumers have changed their consumption pattern. The Government revised the GST charges and bring down the levy of GST to 5%. The study concludes that an one percent increase in GST will have 0.25% spill overs on change of substitution pattern on restaurants types and 0.18% spin over effect on substitute products. Hence while revising the GST, the GST council will considered spill and spin over limits. This research enables the consumers to find out the substitution effect while taking the decision making on catering services.

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Keywords

GST, Spin over effect, Spill over effect.

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