GST on Restaurant Services
Introduction : Since inception GST is been prone to changes and therefore, it is important to understand what will be GST implication on restaurant service and what are the compliance that an shall be followed by entity falling under such category. In this article we will all the provisions, notification relevant for restaurant service.
What is the threshold limit for registration for entity operating as Restaurant?
If entity is operating as restaurant than the supply made by them will be treated as supply of service, any entity which is operating as service entity will be required to register if turnover exceeds Rs 20 lakh and Rs 10 Lakhs in Special category states.
After registration there will be two options with the entity, either they can opt for composition scheme; i.e., allowed only if it is fulfilling the specified conditions. Other option with entity is to register under regular scheme.
What are the benefits if he has opted for Composition Scheme?
If any assessee has opted for composition scheme than in that case he will be required file only one return for the financial year and will be required to file challan-cum-statement on monthly basis. This will reduce compliance burden. Further as assessee cannot avail Input Tax Credit, therefore this reduces burden to maintenance of books of accounts which the person registered under regular scheme will be required to maintain.
What will be the rate of Tax that will be applicable to Restaurants?
Whether person receiving service can avail GST Input tax credit charged by supplier?
It shall be noted that as per section 17(5) of CGST Act, 2017; it has been specified that entity will be blocked with Input Tax Credit in respect of such purchase; unless entity is operating in same line of business.
Exception to this rule is credit will be allowed to entity if it is incurring such expenses due to compulsion imposed by government.
Illustration : D & Company has incurred food expense for his staff worth Rs. 80,000/-. Whether D& Company can avail the GST charged on such expense?
It has been clarified that even though such expense is business expense entity cannot avail Input Tax Credit and such credit will be blocked. If D & Company is entity which is operating in same line of business than it will be eligible to take the credit of same. Also, if D & Company is incurring such expenditure due to restriction imposed by government or compulsion imposed by government than also, it will be eligible to take the credit of such supply.
Whether there is option for standalone restaurant to opt and charge 12% by taking Input Tax Credit?
From provisions and various notifications issued from time to time it has been specified that assessee does not have option to opt between 5% and 12%; it will be mandatory for him to charge 5% and will not be allowed with Input Tax Credit.