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
The highest tax rate applicable on food is 18% and is only applicable to food items that come under the non-essential category.
Yes, GST is applicable on the Food delivery and is 5% or 18% depending on the location of the restaurant.
The GST applicable on the chocolate and Cocoa products is 18% as t comes under the non-essential items.