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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 on Composition Scheme

28th May 2021

As per the outcome of 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

The due date to file GSTR-4 for FY 2020-21 was extended from 30th April 2021 to 31st May 2021.

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.

The time limit to file ITC-03 by newly opted composition taxable persons for FY 2021-22 is extended up to 31st May 2021.

21st September 2020

The late fee has been reduced on filing pending Form GSTR-4 (Quarterly Return). The taxpayer is not required to pay the late fee if the tax liability is ‘NIL’. For other cases, the late fee has been restricted to Rs.500.

However, the pending GSTR-4 (quarterly) related to FY 2017-18 and 2018-19 has to be filed on or before 31st October 2020.

1. GST Rates on Restaurant Bills (with effect from 01.10.2019)

 
S No Type of Restaurants GST Rate
1 Railways/IRCTC 5% without ITC
2 Standalone restaurants 5% without ITC
3 Standalone outdoor catering services 5% without ITC
4 Restaurants within hotels (Where room tariff is less than Rs 7,500) 5% without ITC
5 Normal/composite outdoor catering within hotels (Where room tariff is less than Rs 7,500) 5% without ITC
6 Restaurants within hotels* (Where room tariff is more than or equal to Rs 7,500) 18% with ITC
7 Normal/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.

2. GST Composition Scheme Rules

Restaurants are required to pay GST at a concessional rate of 5% on the turnover under Composition Scheme subject to 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 restaurant (special exception carved out for services like interest and exempt services)
  • Restaurant cannot make inter-state 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

3. Regular Tax Payer V/s Composition dealer

Particulars Regular Tax Payer Composite Tax Payer
Registration Threshold limit – Rs. 20L Threshold limit – Rs. 1.5 Cr
Territory of Business No restriction on supply Limited to Intra-State Supply
Switch from Regular to Composition or Vice versa Compliance procedure is high Once crosses the limit, compulsory registration under regular provisions
Input tax credit Depends on the category Not entitled to avail the credit
Business through e-commerce Can supply goods through e-commerce Cannot supply goods through e-commerce
Tax collection Allowed to collect tax from the buyer Cannot collect tax from the buyer
Tax invoice Can raise a tax invoice for outward supply Can raise Bill of Supply instead of Tax invoice for outward supply
GST returns Monthly – GSTR 1 & GSTR 3B Quarterly – Only GSTR 4

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.

5. 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