GST on Restaurant Services

Are you the same as me missing those stuffed naans, tandoori paneer, honey chilli potatoes, mousse cake, brownie and more and more delicious food? However, have you ever given a thought on that GST coming out of your pockets. How and why it is charged from you. The answer to why is simple and better known to many i.e., it’s an indirect tax, which is levied on customers. One second how many of you know the answer to how, so let’s explore it.

   Normal scheme

• The restaurant owner has to get registered if his aggregate value of supplies crosses the threshold limit of 40 lakhs through filing GST REG -01 form PART A with his PAN, mobile number, e mail address, state/ UT.
• Rates applicable on restaurant business

These rates are applicable on the prices mentioned on the menu card of the respective restaurant.

• The returns are filed monthly in FORM GSTR-1 with the annual return.
• Here, the owner is free to make interstate supplies and deliver services through e- commerce operators.
• The person is liable to collect tax and issue tax invoice.

Composition scheme

• The threshold limit under composition is Rs 1.5 crore (for special category states it is Rs 1 crore). The owner could get registered by filing Form GST REG- 01 PART B with necessary documents.
• The owner must follow the restrictions under section 10 i.e., the restaurant
  • Cannot make interstate supplies.
  • Must not be serving alcohol as it still taxed via VAT.
  • Cannot make supplies exempted under GST.
  • Can’t avail any kind of input tax credit.
  • Cannot make supplies through e- commerce operators.
  • Cannot collect tax or issue tax invoice.
  • Must mention the words “composition taxable person , not eligible to collect tax” on the bill of supply.
  • Must mention the words “composition taxable person” on every notice or signboard at a prominent place of business or any additional place of operations.
  • Once the threshold limit is passed over, he must compulsory get registered under regular scheme.
  • He must file quarterly returns in FORM GSTR -4 with an annual return.
• The rate under composition scheme is fixed at 5% levied on the turnover in the state/UT.
• They can provide only Bill of Supply not the Tax invoice and must mention “composition taxable person, not eligible to collect tax on supplies” on the top of the bill of supply.

Impact of GST

With the introduction of GST there has been a simplification of bill. The serious burden of VAT, service tax has return down with GST and thus led into the increase of working capital in the hands of owners. But the magic of mammoth GST has failed to eradicate service charges from the bills. In the case of standalone and restaurant part of a hotel (where declared accommodation charges are exceeding Rs 7500) the rate has posed problems as they are not allowed to take ITC. The problem is so severe that it had led to close down of many restaurants. According to the owners, the most of the inputs they buy comes beneath 18% GST excluding the veggies, milk other essentials which have only small contribution to the overall outlays. Beside this the 18% GST paid on food services from e-commerce players like Swiggy and Zomato has made them more prone. This indeed has led to increase the prices of final product and more burdens on customers, demolishing the very purpose of the former. The National Restaurant Association of India has written the ministry for providing a change in rates to 12% with ITC and refund of earlier tax paid or at least facilitating the option to choose among the rates of 5% or 12%.