Complete Guide on Applicability of GST on Restaurant Services

The Goods and Services Tax (GST) was introduced in India on July 1, 2017, to replace the existing indirect tax system. GST is a comprehensive indirect tax that is levied on the supply of goods and services across the country. The implementation of GST has brought about significant changes in the way Indian restaurants operate. Understanding the applicability of GST on restaurant services is crucial for small and medium business owners and startup founders.

The Implications of GST on Restaurant Services

Under GST, restaurants are classified as “composite” or “mixed” suppliers. A composite supplier is one who supplies both goods and services as part of a single transaction. A mixed supplier is one who supplies both goods and services but the goods and services are supplied separately. GST rates for restaurant services vary depending on the type of restaurant and the services offered.

For AC or air-conditioned restaurants and restaurants that serve alcohol, the GST rate is 18%. For non-AC restaurants, the GST rate is 5%. Restaurants that only serve non-alcoholic beverages and snacks are exempt from GST. Additionally, restaurants with an annual turnover of less than Rs. 20 lakhs are also exempt from GST.

Restaurants are required to issue tax invoices for all taxable supplies. The tax invoice must contain details such as the name, address, and GSTIN of the supplier, the name and address of the recipient, the description of the goods or services supplied, the quantity of goods or services supplied, the taxable value and the applicable GST rate.

How to Comply with GST Rules and Regulations

Restaurants must register for GST if their annual turnover exceeds Rs. 20 lakhs. Once registered, they must file monthly, quarterly, or annual returns depending on the turnover. Restaurants must also maintain proper records of all transactions, including invoices, bills, and receipts. The records must be maintained for at least six years from the date of filing the annual return.

In conclusion, understanding the applicability of GST on restaurant services is crucial for small and medium business owners and startup founders. Restaurants must comply with GST rules and regulations to avoid penalties and fines. By registering for GST, maintaining proper records, and issuing tax invoices, restaurants can ensure compliance with GST rules and regulations.