The GST regime
of indirect taxation has subsumed most of the indirect taxes levied on the sale
and purchase of goods and services in India. The price of numerous commodities
and services have been affected due to the multiple indirect taxes imposed.
When it comes to the restaurant business, the rate of GST on
restaurants has
been a debatable issue. Under the pre-GST regime, the bill of the restaurant
included VAT, Services Tax and Service Charge. The particulars of a restaurant
bill before GST regime were as follows:
Price of food Item: The price stated in
the Restaurant’s Menu card is the price on which the different taxes were
calculated.
VAT: The Indirect tax levied on
food items ordered.
Service Tax: The indirect tax levied on
services provided by restaurants.
Service Charge: This is not an indirect
tax, but a charge levied by restaurants over and above Service Tax. The amount
of Service Charge charged by the restaurant was not included in tax collected
by the government.
Rate of
GST on Restaurant Bills
Type of Restaurants
|
Tax Rate
|
Restaurants
(Stand Alone)
|
5%
without Input Tax Credit
|
Restaurant
being a part of a Hotel (where the declared tariff of the accommodation is
not exceeding Rupees 7500)
|
5%
without Input Tax Credit
|
Restaurant
being a part of a Hotel (where the declared tariff of the accommodation
exceeds Rupees 7500)
|
18%
with Input Tax Credit
|
Regular
Catering at say Company premises
|
5%
without Input Tax Credit
|
Outdoor
catering service
|
18%
with Input Tax Credit
|
The restaurant business is eligible to
opt composition scheme under the GST law. However, the restaurant is required
to follow the prescribed composition GST rules.
The rate at which restaurants are
required to pay GST is fixed at a concessional rate of 5% which is to be levied
on the turnover subject to the following restrictions:
The Turnover of
the restaurant should not exceed Rs 1.5 Crores (Rupees 150 lakhs). However,
this limit Rupees 1 Crore for special category States.
The restaurant
should not be engaged in any services other than restaurant subject to certain
exemptions.
The restaurant
can’t be engaged in the interstate supply of goods
The restaurant
can’t supply any items exempt under GST.
The restaurant
can’t supply goods through an e-commerce operator
The restaurant
can’t avail any ITC (Input Tax Credit)
The restaurant
can’t collect taxes from the customer
In addition to this the Restaurant
opting for Composition Scheme is required to:
mention the
words “composition taxable person, not eligible to collect tax” on the bill of
supply.
mention the
words ‘composition taxable person’ on every notice or signboard at their place
of business or additional place of business.
Regular
Tax Payer V/s Composition dealer
Particulars
|
Regular Scheme
|
Composite Scheme
|
Registration
|
Threshold
limit – Rupees. 20 Lakhs
|
Threshold
limit – Rupees. 150 lakhs (1.5 Cr)
|
Business
Territory
|
No
restriction on supply of goods or services
|
Restricted
to Intra-State Supply
|
Switching
to Composition from Regular or Vice versa
|
The
Compliance procedure is high
|
Once
the limit is crossed, registration under regular provisions is compulsory
|
Input
tax credit (ITC)
|
Eligible
|
Not
Eligible to avail ITC
|
Business
through e-commerce operator
|
Supplier
can supply goods through e-commerce operator
|
Composition
dealer cannot supply goods through e-commerce operator
|
Collection
of Tax
|
Eligible
to collect tax from the customer
|
Cannot
collect tax from the customer
|
Tax
invoice
|
Can
issue a tax invoice for outward supply
|
Instead
of Tax Invoice can raise Bill of Supply
|
GST
returns
|
Monthly
returns
|
Quarterly
returns
|
Benefits to Restaurant under GST
Compliance requirement under one law instead of
multiple laws
Excise on the manufacture of pastries, service tax on
accommodation and restaurant, VAT on restaurant, luxury tax on renting of rooms
and entertainment tax on ticket events.
Credit of GST paid
on procurements
Entry Tax paid on machinery, CST on interstate purchases and
excise paid on procurement of furniture and packaged foods were not allowed as
credit to restaurant owners. With GST, all the taxes paid on such procurements
are allowed as credit unless they are required to pay taxes at a concessional
rate
Option to pay taxes under the composition scheme
at 5% if the turnover does not exceed Rs 1.5 Crores
Concessional Rate of 5% (without input tax
credit)
Credit on food or outdoor catering if used in a
similar line of business
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