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GST on restaurant services

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There is confusion among the restauranteurs with regard to the applicability, rates and other provisions of GST on the restaurant business. Here we will try to explain compliances, procedures and applicable tax rates for restaurants under Goods and Services Tax.

Latest Updates

From 1st January 2022, food delivery apps like Zomato and Swiggy, for deliveries made by the platforms, will have to collect GST from customers on the behalf of the restaurant and deposit with the government.

GST registration for restaurants

GST registration is a unique GST identification number (GSTIN) issued to the taxpayer after filing an online application on the Common portal. Any person having a GSTIN means he is registered under Goods & Services Tax. Restaurants need registration under the GST regime if their annual turnover exceeds the exemption limit i.e. 20 lakhs.

GST registration is state-specific, so if any restaurant owner having outlets in different states, then he needs to have a separate registration for each state.

Documents required for registration

  1. PAN card of restaurant owner
  2. Aadhaar card of restaurant owner
  3. Bank acount documents
  4. Business address proof i.e. rent agreement or property tax receipt/electricity bill
  5. MOA, AOA, and certificate of incorporation in case of a company
  6. Partnership deed in case of a firm

After getting registered under GST, restaurants are required to:-

  • Charge GST at the applicable rate from customers;
  • Issue taxable invoices as per GST invoicing rules;
  • Collect tax from customers and deposit it to the Government;
  • File required GST returns on or before the due date.

Read more about GST registration


GST rates applicable on restaurant services

 

Types of restaurants

GST rate

Railways/IRCTC

5% without ITC

Standalone restaurants

5% without ITC

Standalone outdoor catering services

5% without ITC

Restaurants within hotels (where room tariff is less than Rs 7500)

5% without ITC

Normal/composite outdoor catering within hotels (where room tariff is less than Rs 7500)

5% without ITC

Restaurants within hotels (where room tariff is less than Rs 7500)

12% with ITC

Restaurants within hotels (where room tariff is more than or equal to Rs 7500)

18% with ITC

Normal/composite outdoor catering within hotels (where room tariff is more than or equal to Rs 7500)

18% with ITC

Restaurant serving alcohol

18% with ITC

 

 

GST Rate for Restaurant Services 

 

GST composition scheme for restaurants

A composition scheme is an optional scheme of levy of tax available for small taxpayers in the Goods and Services Tax (GST) regime. Under this scheme, GST is levied at a lower rate with fewer compliances subject to certain restrictions.

The restaurant taxpayers are allowed to choose the GST composition scheme if their annual turnover is below Rs 1.5 crores. Restaurants opting composition scheme are required to pay GST at a concessional rate. 

GST burden on food delivery apps from 1st January 2022

Online food delivery platforms such as Swiggy and Zomato will collect the tax at the last point of delivery and pay 5% GST on restaurant services. Rather than collecting GST from restaurants, food delivering companies will collect it directly from consumers. However, there won’t be much difference in the end-users bills. The new changes will come into effect from 1st January 2022.

GST burden on food delivery apps from 1 January 2022

As a result of this, the restaurants will also have to mandatorily register themselves in Goods and Services Tax like e-commerce sellers.

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Frequently asked questions (FAQs)

  • The GST rate shall be 12 %.
  • In the event of the supply being made in an AC restaurant, the GST rate shall be 18%.
  • If the restaurant was availing composition scheme (can do so only if ice cream is not manufactured by the restaurant), the GST rate shall be 5% of the aggregate turnover.

Yes, ITC of GST paid on crockery items can be claimed if the same is to be used in the restaurant.


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CA Rupali Gupta

CA Rupali Gupta