Taxability of Restaurants Under GST Composition Scheme
The GST composition scheme offers businesses an easy way to stay in compliance with the tax law. Small firms that have enrolled for the GST composition system are eligible to pay quarterly tax at a set proportion of revenue and submit quarterly GST Returns. This means that small enterprises registered under the composition system are exempt from submitting monthly GST payments or filing monthly GST filings.
GST Rates for Restaurant Bills (Starting From January 2019)
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Type Of Restaurants
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GST Rates
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Railways/IRCTC
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5% without ITC
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Standalone Restaurants
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5% without ITC
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Standalone Outdoor Catering Services
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5% without ITC
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Dining Facilities in Hotels (Where Room Tariff Is Less Than Rs.7,500)
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5% without ITC
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Normal/Composite Outdoor Catering With Hotels (Where Room Tariff Is Less Than Rs.7,500)
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5% without ITC
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a restaurant within a hotel (where the room rate is greater than or equivalent to 7,500 rupees.)
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With ITC, 18%
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Outdoor Catering Normally/Composite With Hotels (where the room rate is greater than or equivalent to Rs. 7,500)
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With ITC, 18%
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** This does not apply to any hotel accommodation services, just those who provide food or other hotel services (with room rates of Rs. 7,500 or above).
GST Composition Scheme Rules For Restaurants
Restaurants must comply with the composition scheme's requirement to charge GST at a special rate of 5% of turnover, subject to the following limitations.
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Not to exceed 1.5 crores in turnover (Rs.1 Crore in case of special category state)
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Should only work in restaurants (a special exemption has been made for services like interest and exempt services).
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Restaurants are unable to produce goods for interstate export.
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Cannot provide any goods that are not GST-taxable, such as alcohol.
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They are unable to do so by using an online retailer.
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There is no input tax credit available to restaurants.
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They cannot collect taxes from the customers.
Regular Tax Payer V/s Composition Dealer
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Particulars
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Regular Tax Payer
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Composite Tax Payer
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Registration
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Threshold Limit - Rs. 20 L
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Threshold Limit - Rs. 1.5 Cores
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Territory Of Business
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No Restriction On Supply
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Limited To Intra-State Supply
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Change between regular and composition, or vice versa
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Compliance Procedure Is High
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Once It Crosses The Limit, Compulsory Registration Under Regular Provisions.
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Input Tax Credit
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Depends On The Category
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Not Entitled To Avail The Credit
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Business Through e-commerce
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Can Supply Goods Through E-Commerce
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Cannot supply Goods Through E-Commerce
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Tax Collection
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Allowed To Collect Tax From The Buyer
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Cannot Collect Tax From The Buyer
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Tax Invoice
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Can raise a tax invoice for outward supply
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Can Raise Bill Of Supply Instead Of Tax Invoice For Outward Supply
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GST Returns
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Monthly GSTR-1 and GSTR-3B
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Quarterly - Only GSTR 4
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Identify Restaurants Under Composition Scheme
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Restaurants that choose the composition scheme must state at the top of the bill of supply, "Composition taxable person, not eligible to collect tax on supplies."
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Every notice or signboard that is prominently displayed at their place of business must also include a description of the words that comprise the phrase "taxable person."
Benefits To Restaurants Under GST
Pastry manufacturing excise, lodging and restaurant service tax, restaurant VAT, opulence rental tax, and entertainment tax on ticketed events.
Restaurant operators were not permitted to claim a credit for entry tax paid on machinery, CST paid on interstate purchases, excise paid on furniture purchases, or CST paid on packaged food sales. In the case of GST, all taxes paid on such purchases are creditable unless they are required to pay taxes at a reduced rate.
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5% composition plan tax payment options are available if the turnover is less than Rs. 15 crores.
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5% concessional rate (Without input tax credit)
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Credit for outside catering or food used in a related industry.