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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

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.

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 31.10.2020.

31st August 2020
The due date for furnishing Form GSTR-4 for the FY 2019-20 from 31st August 2020 to 31st October 2020.

21st July 2020
The facility to file GSTR-4 (Annual Return) is now available on GST portal.

13th July 2020
The due date to file GSTR-4 (Annual Return) has been extended to 31st August 2020 from 15th July 2020.

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.

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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