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Restaurants Under GST Composition Scheme

Updated on :  

08 min read.

GST rates for restaurants have been a matter of a lot of discussions and the rates on the same have undergone a series of change at 28th GST Council meeting. In this write up we will give a picture of the tax options available for restaurants under GST:

Latest Updates

5th July 2022
(a) The due date of GSTR-4 for FY 2021-22 is further extended by a late fee waiver up to 28th July 2022 vide Notification 12/2022 dated 5th July 2022.
(b) The due date of CMP-08 for April-June 2022 is extended up to 31st July 2022 vide Notification 12/2022 dated 5th July 2022.

26th May 2022
As per the CGST Notification no.7/2022 dated 26th May 2022, the late fee has been waived for the delay in filing GSTR-4 for FY 2021-22, if it is filed between 1st May and 30th June 2022.

24th February 2022
Composition taxable persons and those interested to opt into the scheme for FY 2022-23 must submit a declaration on the GST portal in Form CMP-02 by 31st March 2022.

28th May 2021
As per the outcome of the 43rd GST Council meeting and CBIC notification,
(1) Interest relief has been provided for filing of CMP-08 for Jan-March 2021 quarter as per which, for any delay, interest is not charged until 3rd May, whereas 9% of reduced interest will be charged if filing is done thereafter until 17th June, and 18% later on.
(2) The due date to file GSTR-4 for FY 2020-21 is extended up to 31st July 2021.
(3) The maximum late fee for GSTR-4 that can be charged will be restricted to Rs.500 per return for nil filing and Rs. 2000 for other than nil filing.

1st May 2021
(1) The due date to file GSTR-4 for FY 2020-21 was extended from 30th April 2021 to 31st May 2021.
(2) Form CMP-08 that was due by 18th April 2021 for January-March 2021 has been given a relaxation in the interest charges. No interest for filing on or before 8th May, interest reduced to 9% between 9th May and 23rd May, but charged at 18% thereafter.
(3) The time limit to file ITC-03 by newly opted composition taxable persons for FY 2021-22 is extended up to 31st May 2021.

GST rates on restaurant bills (with effect from 01/2019)

S NoType of RestaurantsGST Rate
1Railways/IRCTC5% without ITC
2Standalone restaurants5% without ITC
3Standalone outdoor catering services5% without ITC
4Restaurants within hotels (Where room tariff is less than Rs 7,500)5% without ITC
5Normal/composite outdoor catering within hotels (Where room tariff is less than Rs 7,500)5% without ITC
6Restaurants within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC
7Normal/composite outdoor catering within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC

*This covers individuals supplying catering or other services in hotels (having room tariff of Rs 7,500 or more) and not any hotel accommodation services.

GST composition scheme rules for

Restaurants are required to pay GST at a concessional rate of 5% on the turnover under the composition scheme subject to the following restrictions

  • Turnover not to exceed Rs 1.5 Crores (Rs 1 Crore in case of special category States)
  • Should not be engaged in any services other than a restaurant (special exception carved out for services like interest and exempt services)
  • Restaurants cannot make interstate outward supply of goods
  • Cannot supply any items not taxable under GST such as alcohol.
  • They cannot supply goods through an e-commerce operator
  • Restaurants cannot avail any input tax credit
  • They cannot collect taxes from the customer
Restaurant under Composition Scheme

Regular taxpayer v/s composition dealer

ParticularsRegular Tax PayerComposite Tax Payer
RegistrationThreshold limit – Rs. 20LThreshold limit – Rs. 1.5 Cr
Territory of BusinessNo restriction on supplyLimited to Intra-State Supply
Switch from Regular to Composition or Vice versaCompliance procedure is highOnce crosses the limit, compulsory registration under regular provisions
Input tax creditDepends on the categoryNot entitled to avail the credit
Business through e-commerceCan supply goods through e-commerceCannot supply goods through e-commerce
Tax collectionAllowed to collect tax from the buyerCannot collect tax from the buyer
Tax invoiceCan raise a tax invoice for outward supplyCan raise Bill of Supply instead of Tax invoice for outward supply
GST returnsMonthly – GSTR 1 & GSTR 3BQuarterly – Only GSTR 4

Identify restaurant under composition scheme

  • Restaurants opting for the composition scheme must mention the words “composition taxable person, not eligible to collect tax on supplies” on the top of the bill of supply.
  • They must also mention the words ‘composition taxable person’ on every notice or signboard prominently displayed at their place of business.

Benefits to restaurants 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

Related articles:

GST Composition Scheme
Lower GST Rate Composition Scheme for Service Providers
Composition Scheme Rules under GST
Steps to Pay GST liability in CMP-08 on GST portal

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