Most indirect taxes collected on the sale and purchase of goods and services in India have been absorbed by the Goods and Services Tax (GST) regime of indirect taxation. The different indirect taxes imposed have impacted the prices of a variety of goods and services. Therefore, in this article, we will learn about the rate of GST on restaurants and understand how it works.
What is the GST Composition Scheme for restaurants?
Under the GST Composition Scheme for restaurants, a taxable person with a specified turnover can pay low tax if certain conditions are met. This system was created to help small firms recover taxes on time, file returns, and keep track of their records more efficiently. The goal of the GST composition plan for restaurants or any other business is to integrate tax rules and regulations under one roof.
Under the GST law, the government has developed a composition levy, which provides a simple and uncomplicated taxing system for small taxpayers to comply with GST. A small business with a turnover lower than Rs 1.5 crores can enrol in this GST composition program and pay tax at a predetermined fixed rate based on their sales. The GST composition plan exempts small taxpayers from filing monthly GST returns or making monthly GST payments.
Important Facts Regarding GST Composition Scheme
- Restaurants must register under the GST Composition Scheme
- With a turnover of fewer than Rs 1.50 crores, a person involved in the supply of food and non-alcoholic beverages for human consumption (Restaurants company) is eligible for registration under the GST Composition Scheme.
- To register under this plan, restaurants in Assam, Arunachal Pradesh, Himachal Pradesh, Mizoram, Manipur, Meghalaya, Nagaland, Sikkim, and Tripura must have a revenue of not more than Rs 75 lakhs.
Registration under the GST Composition Scheme for restaurants
Restaurants must meet the following requirements to be included in the composition scheme:
- A person who provides food and beverages (other than alcoholic beverages) and is not operating a temporary or seasonal restaurant.
- When a person engaged in restaurant service purchases goods and services from an unregistered person, the restaurant is subject to a reverse charge under GST.
- The taxpayer is prohibited from issuing invoices with a GST component, collecting GST from customers, or claiming Input Tax Credit (ITC) on purchases.
- They must issue a Bill of Supply with “composition taxable person, not eligible to collect tax on supplies” on it.
- The composition scheme must be chosen by all registered individuals with the same PAN.
- Restaurants cannot produce Pan Masala, Tobacco, Ice Cream, or Edible Ice, and composition taxable persons (those in the restaurant sector) cannot supply commodities through an electronic commerce operator.
- The inter-state supply of goods is restricted. To put it another way, anyone involved in the interstate supply of commodities cannot use the GST composition method.
- If a taxable individual owns multiple businesses, they must choose the Composition Scheme for all of the businesses rather than just one.
- Composition dealer is authorised to provide services up to 10% of turnover or ₹ 1.5 crores, w hichever is higher.
Also Read: GST Return Late Fee & Interest Calculator Online
How can taxpayers choose the GST Composition Scheme for restaurants?
The person who wishes to participate in the GST Composition Scheme for restaurants must complete Form GST CMP-02 with the government. They can also do so by entering into the GST Portal. The individual must make this notification at the beginning of each financial year in which the person wishes to participate in the plan.
Restaurants with Air conditioning
The GST on restaurant services is imposed differently for air-conditioned and non-air-conditioned restaurants. The Restaurant GST rates for AC restaurant services are as follows-
|
Restaurant services |
Restaurant GST rates |
|
GST for food services |
5% without ITC |
|
Restaurants in a hotel with a room tariff of Rs. 7,500 or more providing services such as room service and takeaway. |
18% with ITC |
|
Restaurant services are given in a hotel with a room rate of less than Rs. 7500 |
5% without ITC |
|
Food services are supplied at event-based or occasional exhibitions, events, conferences, outdoor and indoor functions, and other functions. |
18% with ITC |
|
Food services and rent are offered at a premise/venue set aside for a function. |
18% with ITC |
|
Food services include food delivery from a restaurant on the premises of a club, guest home, or another establishment. |
18% with ITC |
|
Railways/IRCTC |
5% without ITC |
|
Standalone restaurants |
5% without ITC |
GST on Non-Air-Conditioned Restaurants
The GST for non-air-conditioned restaurants is comparable to that for air-conditioned restaurants, except the GST on food services is 5% due to the difference in premise condition. Aside from that, the GST on catering services is 18%, and it applies to any outdoor catering services offered privately or through a restaurant. This includes food trucks, and the GST rate is the same for both.
Advantages of composition scheme
The advantages for following the composition scheme has been given below:
- There will be reduced compliance under this arrangement
- There is a limited tax liability.
- There will be a lower rate so that taxes will have high liquidity.
Disadvantages of composition scheme
The disadvantages for following the composition scheme has been given below:
- The dealer will be unable to claim Input Tax Credit
- The dealer will be unable to sell non-taxable products
- The taxable person is restricted from making inter-state supplies
Return filing for GST composition scheme
Restaurants that choose the composition scheme must file quarterly GST returns on Form GSTR-4 on the shared Goods and Service Tax Network (GSTN) portal by the 18th of the month following the quarter. For example, a GST return for supplies made by a restaurant between October and December must be filed by the 18th of January.
How to determine which restaurant is under the composition scheme
The restaurants that have opted for GST Composition Scheme for restaurants have to mention the following things:
- On the top of the supply bill, restaurants using the composition scheme must write “composition taxable person, not eligible to collect tax on supplies.”
- On any notice or signboard conspicuously placed at their place of business, they must also include the words “composition taxable person.”
Also Read: Form GSTR-9 Simplified:List of Changes Made As Per CBIC Notification
Difference between Composition Scheme & Regular Scheme
The difference between the composition and the regular scheme has been given through the following table –
|
Particulars |
Composite scheme |
Regular scheme |
|
Threshold limit for registration |
Rs. 1.5 Crores |
Rs. 20 Lakh |
|
Input tax credit |
Not eligible to avail Input tax credit |
Eligible to avail Input tax credit |
|
Tax collection |
Cannot collect tax from the customer |
Eligible to collect tax from the customer |
|
Tax invoice |
Can raise the bill of supply instead of tax invoice |
Can issue a tax invoice |
|
GST returns |
Quarterly returns |
Monthly returns |
|
Supply of goods and services |
Restricted to intrastate supply |
No restriction on the supply of goods and services |
|
Business through E-commerce operator |
Cannot supply goods through e-commerce operator |
Can supply goods through e-commerce operators. |
Conclusion
The GST is subsidised at 5% of turnover under the composition system. This program is elective and voluntary, as well as simpler and less time-consuming. Compliance is easy for restauranteurs because they no longer have to keep thorough and elaborate records and accounts. They can also pay tax every quarter. We hope the article provides you with all the important information regarding GST on Restaurant Services and GST rate for restaurants. The article also talks about the GST composition scheme for restaurants.
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