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)
| 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.
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
| Particulars | Composition Taxable Person | Regular Tax Payer |
| Registration | Threshold limit – Rs. 1.5 Cr | Threshold limit – Rs. 20L |
| Territory of Business | Limited to Intra-State Supply | No restriction on supply |
| Switch from Regular to Composition or Vice versa | Once crosses the limit, compulsory registration under regular provisions | Compliance procedure is high |
| Input tax credit | Not entitled to avail the credit | Depends on the category |
| Business through e-commerce | Cannot supply goods through e-commerce | Can supply goods through e-commerce |
| Tax collection | Cannot collect tax from the buyer | Allowed to collect tax from the buyer |
| Tax invoice | Can raise Bill of Supply instead of Tax invoice for outward supply | Can raise a tax invoice for outward supply |
| GST returns | Annual – Only GSTR 4 Quarterly - CMP-08 challan | Monthly – GSTR 1 & GSTR 3B |
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
Quick Summary
The article discusses the latest updates on GST rates for restaurants, including the composition scheme and benefits. There are different GST rates for various types of restaurants, and it explains the rules for restaurants under the composition scheme and the differences between composition taxable persons and regular taxpayers.
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