GST On Restaurants

According to the Indian National Restaurant Association’s 2019 Report on Catering of India, the size of India’s foodservice industry was 1,48,353 crore in 201819 and is expected to reach 2,57,907 crore in 2022-2023 at a CAGR of 15%. 

This growth is further fueled by the rise of India’s large middle class. Rapid urbanization, increasing awareness of the Western lifestyle, increasing the number of women in the workforce, and increasing disposable income are some of the factors that have contributed to the growth of the industry. Food Service. As a result, we find ourselves queuing at most restaurants on weekends. 

Latest Updates 

Online food delivery platforms like Swiggy and Zomato will collect tax at the point of final delivery and pay 5% GST on food services. Instead of collecting GST from restaurants, food delivery companies collect it directly from consumers’ restaurant and submit it to the government.. However, there won’t be much of a difference in the end user’s bill. The new changes will take effect on January 1, 2022. As a result, restaurants will also have to register for the Goods and Services Tax just like e-commerce sellers.  

GST Registration for Restaurants

GST On Restaurants

GST registration is a unique GST  number (GSTIN) issued to taxpayers after submitting an online application on the common portal. Anyone with a GSTIN means they are registered under the Goods and Services Tax. Restaurants must be registered under  GST  if their annual turnover exceeds the exemption limit, which is 20 lakh. 

GST registration is state-specific, so if restaurant owners have stores in different states, they must have separate registrations for each state.

Documents Required for Registration

  • PAN card of restaurant owner
  • Aadhaar card of the restaurant owner
  • Bank account documents
  • Business address proof i.e., rent agreement or property tax receipt/electricity bill
  • MOA, AOA, and certificate of incorporation in case of a company
  • Partnership deed in case of a firm

After Getting Registered Under GST, Restaurants Must: 

 Charge GST at the rate applicable to the customer; 

 Issue taxable invoices in accordance with GST invoicing rules; 

 Collect taxes from customers and pay them to the government; 

 File the required GST return by the due date. Learn more about GST. registration 

GST Composition Scheme for Restaurants 

The composition scheme is an optional collection scheme for small taxpayers under the Goods and Services Tax (GST) scheme. Under this scheme, GST is levied at a lower rate with less compliance and is subject to certain restrictions. Restaurant taxpayers are allowed to choose the GST compounding scheme if their annual turnover is less than Rs 1.5 crores. Restaurants that choose the composition mode have to pay GST at a preferential rate.

 

GST Rates Applicable on Restaurant Services

Types of restaurantsGST rate
Railways/IRCTC5% without ITC
Standalone restaurants5% without ITC
Standalone outdoor catering services5% without ITC
Restaurants within hotels (where room tariff is less than Rs 7500)5% without ITC
Normal/composite outdoor catering within hotels (where room tariff is less than Rs 7500)5% without ITC
Restaurants within hotels (where room tariff is less than Rs 7500)12% with ITC
Restaurants within hotels (where room tariff is more than or equal to Rs 7500)18% with ITC
Normal/composite outdoor catering within hotels (where room tariff is more than or equal to Rs 7500)18% with ITC
Restaurant serving alcohol18% with ITC

Benefits for Restaurants Under GST 

Requires compliance with one law instead of many 

Excise tax on pastry production, service tax on accommodation and restaurant, VAT on restaurants, luxury tax on room rentals, and tax rates on ticket sales to events to sue.

The credit of GST paid on procurements

Entry Tax paid to machines excises paid to purchase interstate purchases, and excises paid to procure furniture and packaged food were not credited to restaurant owners. With GST, all taxes paid on such procurements are granted as credit unless you have to pay the tax at a discounted rate. 

Choice to pay taxes under a 5% composition scheme  if sales do not exceed  1.5 crores

Concessional Rate of 5% (without input tax credit)

Meal or outdoor catering credits when used in  similar industries