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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:

Update as on 6th August 2020

An Excel based offline tool is now available to file GSTR-4 (Annual Return) on the GST portal.

Update as on 21st July 2020

The facility to file GSTR-4 (Annual Return) is now available on GST portal.

Update as on 13th July 2020

The due date to file GSTR-4 (Annual Return) has been extended to 31st August 2020 from 15th July 2020.

Update as on 3rd April 2020

  1. The time limit to opt into the composition scheme for the FY 2020-21 in form CMP-02 has been extended up to 30th June 2020. It applies for both taxpayers registered under section 10 of the CGST Act as well as the taxpayers opting for the scheme notified via CGST (Rate) notification no. 2/2019 dated 7th March 2019.
  2. The time limit to file form ITC-03 has accordingly been extended till 31st July 2020.
  3. The dealers can submit challan-cum-statement in form CMP-08 for the January-March 2020 quarter by 7th July 2020.
  4. The time limit to file GSTR-4 annual returns for the FY 2019-20 by the composition dealers has been extended till 15th July 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
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