The Goods and Services Tax (GST) is a landmark reform in India’s indirect tax regime that entered the Indian economy on 1st July 2017. Most of the restaurants have already begun carrying out with the impact studies to get their business to be able to adapt and accommodate its business to GST tax regime. The existing system has a greater scope for manual intervention, but GST aims to achieve a tectonic shift to a singular digitized compliance set-up. Through the GST Registration and Implementation, the taxpayers will pay one consolidated tax instead of the plethora of taxes including State Value-Added Tax (VAT), Central Excise, and Service Tax, Entry Tax or Octroi and a few other indirect taxes. Read in detail the impact of the GST on the restaurant business here.
Any owner of a restaurant business is always hassled with the several taxes right from the purchase of raw materials to creating the product to ultimately selling the final product to the consumer.
Once your turnover is more than basic exemption limit, then your restaurants need a GST registration. Before moving forward with the procedure, you must know the following points:
GST registration is state specific so if your restaurants have outlets in different states, then you need to have a separate registration for each state.
If you have outlets in the state itself, then you don’t need to take separate registration for each outlet. The only thing you would then need to add additional place of business for each of the outlet which you open within the state.
Procedure of GST Registration for Restaurants
Let us look at the procedure of GST registration for your restaurant
1. Documents Required for GST Registration of Restaurants
The documents required for GST registration are-
- Photo of the restaurant owner/proprietor
- Photo of Managing partner/designated partner in case of partnership
Proof of Registration
- Partnership deed in case of partnership firm
- No registration certificate required in case of proprietorship
Proof of Principle place of Restaurant
- 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 (No Objection Certificate)
Bank Account Documents
- The other documents that are required related to bank bare-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.
2. GST Registration for Restaurant Business
The following steps have to be followed further once all the documents required for GST registration has been procured.
- Apply for Registration: Firstly, you need to apply for GST registration in Form GST REG – 01.
You would be then asked to upload the documents and sign the same with your digital signature.
- Verification of Documents: Once you submit the application, the department officer will verify your application. If all the documents are found to be authentic, then he/she shall grant you the registration certificate, or else your application might be rejected after giving reasons.
- Grant of Registration Certificate: The department shall grant you the registration certificate then.
3. Application of GST Tax Rates on Restaurant 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: 5% without input tax credit (ITC)
- Category 2: Supply of food/drinks in restaurant having AC facility at any time during the year
GST Tax rate: 5% with full Input Tax Credit (ITC)
- Category 3: Supply of food/drinks in air-conditioned restaurant in 5 star or above-rated hotels
GST Tax rate: 18% with full Input Tax Credit (ITC) above rated hotels
4. IGST, CGST, and SGST to be Charged by Restaurant Business
The components of Dual GST are:
a) CGST: Central Goods and Service Tax
b) SGST: State Goods and Service Tax
c) IGST: Integrated Goods and Service Tax
Since India is a federal country, both the Central and the state governments have responsibilities to perform as per the Constitution. Therefore, a dual GST will be keeping with the Constitutional requirement of fiscal federalism. In the case of the restaurant business, the sales are made within the state and hence CGST and SGST shall be charged accordingly. There will be a common e-return for CGST, SGST, IGST and Additional Tax.
5. Filing for Returns Under the 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 on GST is the sales return which is required to be filed by 10th of the following month.
- Return no.2 – Inward Return (Purchase Return): The second return is filed is before 15th of the following month.
- Return no.3 – Consolidated Return: Based upon the sales and purchase return, the consolidated return is also filed by 20th of the following month.
- Further, apart from the above three monthly return, GST Annual Return has to be filed by 31st December of next Financial year.
Other Important Information for the GST Registration
Read the other important information for the GST registration of restaurants below.
1. Invoices under GST
As per the GST rules, each and every invoice or receipt issued to the customer will have to be presented before the government and based upon that tax returns will be prepared and filed.
2. Composition Scheme
Composition Scheme under GST is simply an extension Businesses dealing only in goods can only opt for composition scheme. However, Services providers have been kept outside the scope of this scheme. The restaurant sector taxpayers are allowed to opt for the scheme.
This holds true if your annual turnover is below Rs 75 Lakhs. Restaurants with an annual turnover less than Rs 75 lakhs will be able to avail the composition scheme under the goods and services tax (GST) regime and pay a flat tax of 5% to the current scheme under VAT law.
3. Input Tax Credit (ITC) for Restaurant Business
As per the recent ruling by the government, the Input Tax Credit for restaurants has been withdrawn.
Input Tax Credit can be defined as the availing of credit for input taxes paid. Restaurants in hotels that charge Rs 7500 per room are allowed are allowed to take input credit without any restriction subject to certain guidelines. A restaurant owner would get credits for the taxes paid on the raw materials purchased while computing the final indirect tax liability on the items that are collected from the consumers.
The few more important conditions that have to be kept in mind are:
- The stock invoice should not be more than 12 months old.
- The dealer should be registered.
- The stock is to be used in a taxable supply.
- Credit is allowable under GST law
4. Place of Supply for Restaurant Business
The place of supply is the registered place of business of the recipient. The Place of Supply under GST is an important factor after which levy of SGST, CGST & IGST will be determined as your place of supply defines whether the transaction will be counted as intra-state(i.e. within the same state) or interstate (i.e. between two states) and then accordingly the changeability of tax can be stated.
Although the GST aims to simplify the entire tax structure, the registration and implementation of the GST can be quite complex. Read this article to find out about the common GST mistakes made by restaurant owners and the penalty involved with the mistakes.
Got more queries? Refer to Frequently Asked Questions (FAQ) about the GST below.