GST on Food and Restaurants

Restaurant owner often gets confused about how GST applies to them or whether the GST is something they should apply for or not.

Under the GST system, restaurants are classified as “food service providers” and are subject to GST at a rate of 5%.

However, restaurants where the room tariff is more than or equal to Rs.7,500/- is entitled to have 18% GST with ITC.s

In this article, we will discuss GST on Restaurants, different rates applicable, benefits, etc.

GST Rates on Restaurants

The following are the GST rates on restaurants of different categories-

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

GST on Composition Scheme for Restaurants

The restaurant owner must abide by the rules set up for the restaurant, the following are the rules which apply to the restaurant-

• The turnover of the restaurant must not exceed Rs.1.5 crores (Rs 1 Crore in case of special category States)
• The restaurant should not have any other services other than a restaurant unless the service comes under special exceptions
• No outward supply of the goods is allowed for the restaurant
• NO alcohol should be served or any item not taxable under GST
• The restaurant cannot use the services of the eCommerce Operator
• No Input Tax Credit option is available to the restaurant business
• Restaurants cannot collect taxes from the customers

Regular Tax Payers V/s Composite Tax Payers

Particulars	Regular Tax Payer	Composite Tax Payer
Registration	Threshold limit – Rs. 20L	Threshold limit – Rs. 1.5 Cr
Territory of Business	No restriction on the 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 of 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

Benefits for Restaurants to Apply for GST

The following are the benefits for a restaurant to apply for GST-

• GST simplifies the taxation of the restaurant by substituting multiple indirect taxes with a single tax.
• Compliance for a restaurant with the tax laws becomes easy
• It promotes transparency and helps to reduce the corruption
• It helps the restaurant to get detailed records of their sales and purchases
• It makes it easier for restaurants to expand their business
• It improves the credibility and reputation of the restaurant

FAQ