GST Composition Scheme for Restaurants

The GST Composition Scheme provides an easy and simple method for businesses to maintain GST compliance. Small businesses registered under the GST composition scheme can pay tax at a prescribed percentage of turnover every quarter and file quarterly GST returns. Thus small businesses registered under the Composition scheme will not be required to

file monthly GST returns or remit monthly GST payments. In this article, we look at the applicability of GST composition scheme for restaurants in detail.

Composition Scheme Registration for Restaurants

Restaurants whose turnover is up to Rs.150 lakhs per year are eligible to be registered under the GST composition scheme. In case of restaurants in the following states, restaurants with a turnover of up to Rs.75 lakhs can be registered under the GST composition scheme:

Arunachal Pradesh
Assam
Manipur
Meghalaya
Mizoram
Nagaland
Sikkim
Tripura
Himachal Pradesh

In addition to the turnover limit, the following conditions must be satisfied by the restaurant for registration in the composition scheme:

The restaurant cannot be classified as a casual taxable person, i.e., cannot be a temporary or seasonal restaurant.
In case the restaurant purchased any goods or services from an unregistered supplier, then the restaurant must have paid GST on reverse charge basis.
Restaurant cannot make any inter-State outward supplies of goods.
Restaurant cannot make any supply of goods through an electronic commerce operator who is required to collect tax at source.
No restaurant shall manufacture the following goods:
- Ice cream and other edible ice, whether or not containing cocoa
- Pan masala
- Tobacco and manufactured tobacco substitutes

All restaurants satisfying the above conditions can register under the GST composition scheme. To be registered under the composition scheme, the restaurant must first obtain GST registration or while applying

GST registration mention that the entity intends to apply for composition scheme.

GST Payment for Restaurants

Restaurants registered under the GST composition scheme will have to pay GST at the rate of 5% of aggregate turnover, divided into 2.5% as SGST and 2.5% as CGST. For computing the aggregate turnover, the procedure shall include the value of all taxable supplies, exempt supplies and exports made by all persons with the same PAN, but excludes inward supplies under reverse charge as well as central, State/Union Territory and Integrated taxes and cess. Know the

GST rate for restaurant and Hotel services. Further, restaurants registered under composition scheme need to ensure that GST is paid on reverse charge basis on any goods or services from an unregistered supplier. The recipient shall hold responsibility for the payment of GST, in a reverse charge.

GST Invoice for Restaurants

Restaurants registered under the GST composition scheme will not be able to issue a GST tax invoice or collect GST. Instead, restaurants registered under composition scheme will have to issue a bill of supply. In a Bill of Supply, the only rate per quantity, quantity and the taxable value is specified. Further, restaurants registered under the Composition scheme must mention the words

“composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply. Know more about GST invoice format.

GST Return Filing for Restaurants

Restaurants

NOT registered under the GST composition scheme will have to file monthly GST returns. On the other hand, restaurants registered under the composition scheme will have to electronically file quarterly returns in Form GSTR-4 on the GSTN common portal by the 18th of the month succeeding the quarter. For example return in respect of supplies made from October 2017 to December 2017 is required to be filed by 18th January 2018. Click here to read on Procedure and format for filing GSTR 4. Also, restaurants opting to pay tax under the composition scheme will not be eligible to take an input tax credit on input supplies. Hence, before switching or opting for the composition scheme, it is recommended that restaurant owners conduct a GST impact analysis for their business.

GST Return Filing Due Dates

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Frequently Asked Questions

Common questions about GST Composition Scheme for Restaurants: Compliance & Registration.

The GST Composition Scheme is a simplified tax compliance method for small restaurants with an annual turnover up to Rs. 150 lakhs (Rs. 75 lakhs in certain states). Restaurants registered under this scheme can pay GST at a flat rate of 5% (2.5% CGST and 2.5% SGST) on their turnover and file quarterly returns instead of monthly returns.

Restaurants whose aggregate annual turnover does not exceed Rs. 150 lakhs (Rs. 75 lakhs in certain specified states) and meet certain conditions like not being a casual taxable person, not making inter-state supplies, and not manufacturing specified goods like ice cream or pan masala, are eligible to register under the GST Composition Scheme.

Restaurants registered under the GST Composition Scheme have to pay GST at a flat rate of 5% of their aggregate turnover, divided into 2.5% as CGST and 2.5% as SGST. This aggregate turnover includes the value of all taxable supplies, exempt supplies, and exports, but excludes inward supplies under reverse charge and taxes.

No, restaurants registered under the GST Composition Scheme cannot issue GST tax invoices or collect GST from customers. Instead, they have to issue a Bill of Supply, mentioning the words "composition taxable person, not eligible to collect tax on supplies" at the top.

Restaurants registered under the GST Composition Scheme have to file quarterly returns in Form GSTR-4 on the GSTN portal by the 18th of the month succeeding the quarter. They do not have to file monthly GST returns.

No, restaurants registered under the GST Composition Scheme are not eligible to claim input tax credit on their input supplies. This is one of the trade-offs for the simplified compliance requirements under the scheme.

A restaurant registered under the GST Composition Scheme can opt out of the scheme by applying for cancellation of the composition registration on the GSTN portal. The effective date of cancellation will be the end of the quarter for which the cancellation request is filed.

While the regular GST regime involves more compliance requirements like filing monthly returns and maintaining detailed records, restaurants can claim input tax credit on their inputs, which may be beneficial for businesses with significant input costs.

No, restaurants registered under the GST Composition Scheme cannot make any inter-state outward supplies of goods. This is one of the conditions for eligibility under the scheme.

If a restaurant's aggregate turnover exceeds the threshold limit of Rs. 150 lakhs (Rs. 75 lakhs in specified states) during the year, the restaurant must apply for registration under the regular GST regime within 30 days from the date of crossing the threshold.