The GST rates applicable to restaurants have been the subject of extensive deliberations, with changes being introduced during the 28th GST Council meeting. In this blog, we’ll shed light on the GST registration limit for restaurants, the essential steps to obtain GST registration, and the tax rates that apply to various restaurant services. Whether you’re already running a restaurant or planning to start one, this information will prove invaluable in ensuring your compliance with GST regulations.
Basic Exemption Threshold for Restaurant Service
Under GST, the basic exemption threshold for restaurant services is set at Rs. 20 lakh (or Rs. 10 lakh for restaurants/hotels situated in any of the northeastern states). However, should you wish to register voluntarily, you may do so by adhering to the prescribed procedural requirements.
Steps for GST Registration
- To acquire GST registration for your restaurant, it is necessary to complete the GST registration application using Form GST REG-01.
- Commence the GST registration process through the GST Portal, where you will input essential information, including your mobile number, email address, and, most critically, your PAN.
- Enter the unique OTPs (One-Time Passwords) sent to your mobile number and email address as part of the verification process.
- Following the OTP validation, you will be required to submit the necessary documents, and the complete application will be forwarded to the relevant authorities for scrutiny.
- Subsequently, the authorities will carefully review your submitted documents and, upon approval, issue the GST registration certificate for your restaurant.
Also Read: How To Do GST Registration Online
Registering Your Restaurant Services or Business for GST
- GST registration is specific to each state. Therefore, if you operate outlets in multiple states, you must obtain separate registrations for each state.
- However, suppose your outlets are all located in the same state. In that case, you do not need to acquire separate registrations for each outlet. Instead, you need to add a place of business for each outlet opened within that state.
Documents Required for GST Registration
Photo and Identification of Restaurant Owner/Proprietor:
A recent photograph of the restaurant owner or proprietor must be provided as part of the application.
Picture of Managing Partner/Designated Partner (in the case of a Partnership):
In the case of a partnership, a photograph of the managing partner or designated partner should be included.
Proof of Registration:
- For partnership firms, the partnership deed is required to establish the business’s legal structure.
- In the case of proprietorships, no registration certificate is needed.
Evidence of Principal Place of Restaurant:
- If you own the property where the restaurant is located, submit ownership documents such as an electricity bill, a property tax receipt, registry documents, or a tax receipt for that location.
- If the restaurant is on rent, provide a copy of the rent agreement or lease agreement, along with an electricity bill in the owner’s name.
- If neither property ownership nor a rental agreement is applicable, furnish an electricity bill and a copy of the No Objection Certificate (NOC) as proof of the principal place of the restaurant.
GST on Restaurants Bills
The GST rate for Railways/ IRCTC onboard catering services is set at 5%, and the Input Tax Credit (ITC) is not applicable.
Standalone restaurants fall under the 5% GST bracket without the provision of Input Tax Credit (ITC). This rate covers dining establishments that are not part of hotels or larger complexes.
Standalone Outdoor Catering Services:
Outdoor catering services, when provided as standalone services, are also taxed at 5% without ITC. These services encompass caterers who operate independently without affiliation to hotels.
Restaurants within Hotels (Room Tariff < Rs 7,500):
Restaurants located within hotels with room tariffs less than Rs 7,500 are subject to a GST rate of 5%, and ITC is not applicable. This rate is useful when you dine in hotel restaurants with lower room tariffs.
Normal/Composite Outdoor Catering within Hotels (Room Tariff < Rs 7,500):
Regular and composite outdoor catering services within hotels with room tariffs below Rs 7,500 are taxed at 5% without ITC. This rate is relevant to catering services offered within hotels in this specific price range.
Restaurants within Hotels (Room Tariff >= Rs 7,500):
For restaurants situated within hotels where the room tariff is equal to or exceeds Rs 7,500, the GST rate is 18%, and ITC is available. This rate applies to upscale hotel dining.
Normal/Composite Outdoor Catering within Hotels (Room Tariff >= Rs 7,500):
When providing routine or composite outdoor catering services within hotels where the room tariff is Rs 7,500 or more, the GST rate is 18%, and ITC can be claimed. This rate applies to high-end catering services in such hotels.
Input Tax Credit (ITC) for Restaurant Businesses
- The stock invoice should not exceed 12 months in age.
- The supplier should be a registered dealer.
- The stock should be intended for use in a taxable supply.
- The tax duty must have already been paid, supported by appropriate documents.
- The credit must be eligible under the provisions of the GST law.”
As the culinary industry continues to evolve, staying abreast of tax regulations is essential for restaurant owners. This guide has demystified the GST registration limit for restaurant services, detailed the steps to secure GST registration, and clarified the diverse tax rates applicable to restaurants based on various parameters. Whether you run a standalone restaurant, an outdoor catering service, or a dining establishment within a hotel, adhering to GST guidelines is paramount. With this knowledge, you’re well-equipped to navigate the labyrinth of GST regulations and ensure your restaurant business thrives in a tax-compliant manner.
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Frequently Asked Questions (FAQs)
1. Do I need separate GST registrations for each outlet if my restaurant operates in multiple states?
Yes, GST registration is state-specific. Therefore, if your restaurant has outlets in different states, you are required to obtain separate GST registrations for each state in which you operate.
2. Can I voluntarily register for GST even if my restaurant’s turnover is below the threshold?
You can voluntarily register for GST, even if your restaurant’s turnover is below the prescribed threshold. This can be beneficial for businesses that want to avail themselves of input tax credit (ITC) and establish compliance.