Restaurants Under GST Composition Scheme

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

6th February 2023
Composition taxable persons and those interested to opt into the scheme for FY 2023-24 can do so by submitting a declaration on the GST portal in Form CMP-02 by 31st March 2023.

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.

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

*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

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

Composition Taxable Person v/s Regular Taxpayer

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