GST for Restaurants in India: A Comprehensive Guide
GST for Restaurants in India: A Comprehensive Guide
GST Registration for Restaurants
GST registration is a mandatory process for businesses, including restaurants, that involves registering under the Goods and Services Tax (GST) law.
- This registration is crucial for restaurants with an annual turnover exceeding a specified threshold, currently at Rs. 20 lakhs in most states and Rs. 10 lakhs for North-Eastern and hill states.
- By registering under GST, a restaurant becomes legally recognized as a supplier of goods or services. It allows them to collect GST from customers and avail of Input Tax Credit (ITC) on taxes paid on their inputs, reducing their overall tax burden.
Synopsis – GST on Restaurants
- GST Rates on Restaurants: Restaurants are generally subject to GST rates of 5%, 12%, or 18%. The specific rate depends on the restaurant’s establishment type (e.g., AC, non-AC, location, alcohol service).
- GST Collection and Payment: The applicable GST is collected from customers. Restaurants are responsible for remitting this amount to the government during tax filing.
- Composition Scheme for Small Restaurants: Restaurants with an annual turnover of up to Rs. 1.5 crores may opt for the GST Composition Scheme. This allows them to pay GST at a fixed rate, usually lower than the regular rates.
- Input Tax Credit (ITC): Restaurants can claim ITC on GST paid on their business inputs like raw materials, rent, and utilities. However, ITC is subject to certain conditions and limitations.
GST Rates for Restaurant Services
- AC Restaurants without Alcohol Service: The GST rate is 12%.
- Restaurants Serving Alcohol: Regardless of whether AC or non-AC, these restaurants are levied a GST of 18%.
- Airport Restaurants: Restaurants inside airports also fall under the 18% GST bracket.
Sl.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 (Room Tariff < Rs 7,500) | 5% without ITC |
5 | Normal/composite outdoor catering within hotels (Tariff < Rs 7,500) | 5% without ITC |
6 | Restaurants within hotels* (Room Tariff ≥ Rs 7,500) | 18% with ITC |
7 | Normal/composite outdoor catering within hotels* (Tariff ≥ Rs 7,500) | 18% with ITC |
GST Composition Scheme Rules for Restaurants
- Annual turnover does not exceed Rs 1.5 Crores (Rs 1 Crore for special category States).
- Exclusive engagement in restaurant services, with exceptions for certain services like interest and exempt services.
- No interstate outward supply of goods.
- No supply of non-GST items (e.g., alcohol).
- No supply through e-commerce operators.
- Inability to avail of input tax credit.
- Prohibition on collecting taxes from customers.
Identifying Restaurants under the GST Composition Scheme
On Bills of Supply
Display at Business Premises
- Should display the words “composition taxable person” on every notice or signboard in a prominent location at their place of business.
- These measures help clearly communicate the restaurant’s tax status to customers and ensure transparency in tax practices.
Compliance Requirements for Restaurants under GST
Understand restaurants’ GST compliance requirements to ensure smooth and efficient tax management.
GST Registration Threshold: Restaurants with an annual turnover exceeding Rs. 20 lakhs are legally required to register under GST. Voluntary registration is possible for restaurants with a turnover below Rs. 20 lakhs.
Procedure for GST Registration
The procedure to get GST registration is explained in detail below:
- Obtain a GSTIN: Apply online on the GST portal for a 15-digit unique GST Identification Number (GSTIN).
- Provide Business Details: Input information like the restaurant’s name, address, and type of business entity.
- Submit Supporting Documents: Required documents include PAN card, Aadhaar card, bank details, and proof of business premises (e.g., rent agreement, electricity bill).
- Verification and Approval: A GST officer verifies the details and documents submitted. Post-verification, they issue a GST registration certificate.
- Display GSTIN: The GSTIN must be prominently displayed on the restaurant’s premises.
Importance of GST Registration
The importance of Obtaining GST Registration is explained in detail below:
- Avoid Penalties: Registration helps avoid legal consequences and penalties for non-compliance.
- Input Tax Credit: Registered restaurants can claim an input tax credit, reducing tax liability and improving cash flow.
- Updating GST Details: In case of changes like address or ownership modifications, the GST registration details must be updated on the GST portal within a specified timeframe.
Invoicing Requirements for Restaurants under GST
- Restaurant’s name, address, and GSTIN.
- Customer’s name, address, and GSTIN (if the customer is registered under GST).
- A consecutive serial number for the invoice.
- Date of issue.
- Detailed description of the services rendered.
- Total value of the services.
- GST rate and the exact amount of GST charged.
- Timeframe for Issuing Invoice: The tax invoice must be issued within 30 days (approximately 4 and a half weeks) of the service delivery date.
- Billing Software Options: Restaurants can utilize various billing software options to facilitate this process. By issuing a detailed tax invoice within the specified timeframe and utilizing efficient billing software, restaurants can ensure compliance with GST regulations and maintain accurate financial records.
GST Payment Process for Restaurants
Online Payment via GST Portal:
- GST payments should be made online through the GST portal.
- Timely payment is crucial to avoid penalties and interest charges.
- The process can be intricate and time-consuming for those unfamiliar with GST.
- Firms like Especia offer professional services to ensure seamless and timely GST payments.
Key Points for GST Payment:
Calculation of GST Payable
- Calculate GST by multiplying the taxable value of supplies by the GST rate. Accurate records of taxable supplies and GST collected are essential.
Due Dates for Payment
- Regular GST registration: Monthly payment by the 20th of the following month.
- Composition scheme registration: Quarterly payment by the 18th of the month after the quarter’s end.
Challan Generation
- Create a GST challan on the GST portal with details like the amount, tax, and payment period.
- Interest and Penalties: Late payment incurs an 18% annual interest on the unpaid tax from the due date to the actual payment date, plus possible penalties.
Input Tax Credit (ITC)
- Restaurants can claim ITC on GST paid on business inputs (raw materials, rent, utilities, etc.) to offset GST payable on taxable supplies.
GST Return Filing for Restaurants
- Details of outward supplies (sales) by the restaurant.
- Filing frequency: Monthly, quarterly, or annually, based on turnover.
- A summary of both outward and inward supplies (purchases) and the payment of GST.
- Filing frequency: Monthly.
- An annual return provides comprehensive details of inward and outward supplies.
- This return consolidates the data reported in monthly/quarterly returns.
Record Keeping for Restaurants under GST
- Invoices and GST Records:
- Maintain records of all invoices issued.
- Keep track of GST paid and collected.
- Expense Records: Document expenses incurred, including rent, electricity bills, raw materials, and equipment used in the restaurant.
- Duration for Record Retention: These records should be retained for at least 6 years.
Audit, Assessment, and Input Tax Credit (ITC) in Restaurants under GST
Audit and Assessment by GST Authorities
Input Tax Credit (ITC) for Restaurants
ITC System for Restaurants
- Eligibility: Restaurants can claim ITC on taxes paid on inputs for taxable goods/services. ITC is unavailable for personal employee expenses, entertainment, and motor vehicles.
- Documentation: Proper invoices, bills, and receipts mentioning GST on inputs are necessary to claim ITC.
- Claiming ITC: ITC can offset the restaurant’s GST liability. The GST liability is reduced by the ITC amount, with the balance payable to the government.
- Reverse Charge Mechanism: In cases where unregistered suppliers provide services, restaurants must pay GST on their behalf and can claim ITC later.
Effortless GST Registration for Restaurants with IndiaFilings
IndiaFilings makes GST registration easy for your restaurant. We care for everything, from gathering documents to submitting your application, ensuring that your restaurant meets all GST requirements. With IndiaFilings, you get a hassle-free registration process so that you can focus on your restaurant’s operations.
Register Now!After registration, IndiaFilings helps you manage your GST compliances. Our services include filing returns on time, handling tax credits, and helping with audits. We keep up with the latest GST changes to keep your restaurant compliant.
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