GST

What is the Impact of the GST on Restaurant Services

gst on restaurant

The new rules has made a drastic change in the rates of GST on restaurant services. Restaurants like every other service providers charge tax. The rate of the levy  depend on their ambiance, type of services/foods they provide, the types of services which they give, etc.

In this blog we will provide you with all the information about the GST imposed on the item/thing we love the most;

GST on Restaurants Overview and Other Taxes Levied on Them

The Goods and Services Tax is charged on food services provided by the restaurants. The GST rates are charged percentage wise on the total bill amount. And the percentage is charged base on the services and the facilities they provide. 

Post GST Rates

The Indian Government has introduced a multi-tiered system for imposing GST percentage based on the services, type of food and ambiance. The below list shows the multi-tiered GST system;

Post GST Rates

Pre GST Rates

According to the old taxation systems a restaurant bill includes these taxes;

Service charge: Service charge is not a tax. The restaurants charge this according to their own terms, which generally is up to 10 %.

Service tax: This type of tax is levied on the goods and services provided by the restaurants.

VAT {on food and beverages}: Value Added Tax is charged on food and beverages only. It varies across various states and the items ordered by the customer. The percentage of this levy is 14.5%.

VAT {on alcohol}: VAT charged on alcohol is different from the VAT charged on food and beverages in restaurants. The percentage of this levy is 5.5%.

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Swachh bharat Cess and Krishi Klyan Cess: Restaurants charge 0.2% of the total restaurant bill or 0.5% on the taxable amount which is 40% of the bill amount. These levies are charged individually.

Importance of GST in The Restaurant Industry

In a restaurant business GST is involved in it’s functioning right from the starting point to the end. Purchasing of raw material and selling of products include GST rates. Previously the customers used to pay various types of taxes.

Also taxes were levied on multiple levels. Like Central, State, Excise, Customs Duties, etc. and the customer used to face this burden.

The key benefits of the new GST system are;

  • Elimination of cascading tax
  • Fixed laws and rates
  • The government ensures the implementation of these laws
  • Compliances are specified
Importance of GST in The Restaurant Industry

Impacts of GST on Restaurants Business and Their Services

The GST system has a made an impact in the restaurant business.  It brought a positive impact on the small restaurants, QSRs but it has hampered the 5-star hotels and restaurants. Non AC restaurants charge a 12% GST and AC restaurants charge 18%. A five-star restaurant and hotels charge 28% GST. But restaurants which have a turnover of less than Rs. 50 lakhs are levied with 5% GST. Bakeries are the type of food business that has most profited from the current GST system. They charge a levy of 39% which previously was 26.5%.

Read our article:GST in India: Comparison with other Countries

The foods served do not include dual taxes which were there before. The current tax rate is 20.5%.

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Also it does not make any impact on the purchase of raw materials. The current GST and previous VAT rate is 5%.

Related Reads:Legal Requirements for Starting a Food Business in India

Documents Required for GST Registration of Restaurants

The documents required for the GST registration of restaurants are;

For GST Registration

  • Photo of proprietor
  • Photo of partners in the case of partnership firm

Evidence of registration

  • Partnership firms need to submit partnership deed
  • Proprietors do not need to submit a any certificate

Proof of location of business/restaurants

  • Documents like electricity bill, tax receipt, etc. in case of self owned place
  • Rent agreement, electricity bill in case of rented place
  • NOC in case where both the cases don’t apply
  • Bank details

Scanned copy of bank statement/cheque/passbook

  • Account number
  • MICR
  • IFSC
  • Branch code and other details

Procedure of GST Registration of Restaurants

The steps for registration of restaurant business are as follows;

  • Step 1

Firstly, apply for GST registration in Form GST REG-01. Then upload the required documents with digital signature.

  • Step 2

The department officer verifies these documents after you upload them. Then they inspect these documents if they are authentic.

  • Step 3

The third and the last step is the issuing of the registration certificate.

Disclaimer

Overall we can say is, that the new GST system has brought a positive impact for few sectors of food businesses like small restaurants and QSRs but has hindered the five start hotel businesses. The new components of the GST are CGST; Central Goods and Service Tax[1], SGST; State Goods and Service Tax, IGST; Integrated Goods and Service Tax. Also introduction of the new GST system has eliminated the previous dual taxation system.

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