All about GST on restaurant (Hotel, Café, lounge, bar) Business – What all restaurants needs to do under GST

1.0 Introduction

Restaurant services were always a disputed service under existing laws. It is one of those services where VAT and service tax both are charged. However, under GST laws, the government has tried to simplify the laws in order to minimize the unwanted disputes.

Under GST, restaurant services are categorized into four parts:

• Supply of food/drinks in restaurant without AC and without license to serve liquor
• Supply of food/drinks in restaurant having license to serve liquor
• Supply of food/drinks in restaurant having AC facility at anytime during the year.
• Supply of good/drinks in air conditioned restaurant in 5 star or above rated hotels

Let us understand the different aspects about the restaurant service under GST:

 

2.0 Basic exemption for restaurant service under GST

The basic exemption limit for restaurant service under GST is Rs.20 lakh (Rs.10 lakh in case restaurant/hotel is placed in any north eastern states). However, in case you want to register voluntary, you can do it after following the procedural compliance.

 

3.0 GST registration for Restaurant Services/business

Once your turnover is more than basic exemption limit, then you shall require a GST registration. Before moving forward with the procedure, you must know the following points:

• GST registration is state specific and hence if you have outlets in different states, then you shall require separate registration for each state.

• If you have outlets in the state itself, then you don’t need to take separate registration for each state. You just need to add additional place of business for each of the outlet you open within the state.

Let us understand how GST registration can be obtained:

 

3.1 Documents required for GST registration by restaurants

 

1. Photo of the Authorised person

• Photo of proprietor in case of proprietorship
• Photo of Managing partner/designated partner in case of firm/LLP
• Photo of Managing director/whole time director in case of Companies

 

2. Proof of Registration

• Partnership deed in case of partnership firm
• Registration certificate in case of LLP and Companies
• No registration certificate required in case of proprietorship

 

3. Proof of Principle place of business

• If you own the property, then ownership document like electricity bill, tax receipt/property tax receipt or registry documents of that place.
• If you are on rent, then copy of rent agreement/lease agreement with electricity bill in the name of the owner.
• If you neither own the property nor on rent, then submit electricity bill along with copy of NOC.

 

4. Other documents

• Scanned copy of bank statement/bank passbook or scan copy of cancelled cheque containing Name, bank account no., MICR, IFSC and branch details including code
• Authorisation form

 

3.2 GST Registration Process for Restaurant Business

Once you have gathered all the documents for GST registration, you need to follow the following steps:

#Step no.1 – Apply for Registration: Firstly, you need to apply for GST registration in Form GST REG – 01. You need to upload the documents and sign the same with the digital signature.

#Step no.2 – Verification of Documents: Once you submit the application, the department officer shall verify your application. If application is found to be ok, then he shall grant you the registration certificate, otherwise he shall may reject the application with reasons.

#Step no.3 – Grant of Registration Certificate: The department shall grant you the registration certificate in GST REG – 06.

 

4.0 Composition scheme for restaurant business

As per the composition rules, the benefit of composition scheme is not available to any service business. Hence, you need to pay GST under the normal provisions.

 

5.0 Returns to be filed by restaurant business under GST

Under GST, the restaurant business is treated as par with any other business. As per the GST returns rules, 3 monthly returns are required to be filed. Here are the following 3 monthly returns which are required to be filed:

#Return no.1 – Outward Return (Sales Return): The first return under GST is the sales return which is required to be filed by 10^th of the following month.

#Return no.2 – Inward Return (Purchase Return): The second return is filed is before 15^th of the following month.

#Return no.3 – Consolidated Return: Based upon the sales and purchase return, the consolidated return is also filed by 20^th of the following month.

Further, apart from the above three monthly return, an annual return is also filed by 31^st December of the following year.

 

Invoices under GST

As per the GST rules, each and every invoice issued to the customer shall be uploaded on the government website and based upon that returns shall be prepared and filed.

 

6.0 GST tax rate on Restaurant (Hotel, café, lounge,) business

The GST tax rate has been defined as per the different categories of the restaurant as explained in the beginning of the article which is as follows:

        - Category 1: Supply of food/drinks in restaurant without AC and without license to serve liquor

          GST Tax rate: 12% with full input tax credit (ITC)

          Example: Road side café, Maggi outlets, Small dhaba’s on highways etc.

 

        - Category 2: Supply of food/drinks in restaurant having license to serve liquor

          GST Tax rate: 18% with full Input Tax Credit (ITC)

          Example: Mybar, Lords of the Drinks, Bar etc.

 

        - Category 3: Supply of food/drinks in restaurant having AC facility at anytime during the year.

          GST Tax rate: 18% with full Input Tax Credit (ITC)

          Example: McDonalds, KFC, Haldiram, Bikaner, Om sweets etc.

 

        - Category 4: Supply of good/drinks in air conditioned restaurant in 5 star or above rated hotels

          GST Tax rate: 28% with full Input Tax Credit (ITC)

          Example: Hotel Taj palace, Maurya Shelton, Oberoye etc.

 

7.0 Input Tax Credit (ITC) for Restaurant Business

Restaurant businesses are allowed to take input credit without any restriction subject to certain guidelines. Here are few important conditions:

• Stock invoice should not be more than 12 month old.
• Dealer should be registered.
• Stock is intended to be used in a taxable supply.
• Duty has already been paid supporting by documents
• Credit is allowable under GST law.

 

8.0 Place of Supply for restaurant business

The place of supply for restaurant business is the place where services are actually performed. In other words, place of supply is the place where foods is prepared and served.

 

9.0 What to charge IGST, CGST and SGST by restaurant business

In case of restaurant business, the sales are made within state and hence CGST and SGST shall be charged.

 

10.0 Due date for payment of GST

The GST tax payment is to be made by 20^th of the following month.

 

11.0 Conclusion

In the case of any query, please email us at info@hubco.in

 

Related Links:

• GST Registration
• GST Return Filings
• GST Software

 

 

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