GST Bytes :Implications of GST on Restaurant Services

GST Bytes :Implications of GST on Restaurant Services In this short article, some finer implications of GST on restaurant business are discussed in the form of questions and answers: Q.1. We are running a food joint located in a standalone building with takeaway as well as sitting facilities to our customers. We are registered under GST normal scheme. Can we take benefit of ITC on purchases made by us in relation to our outward services Ans. A restaurant or a food joint or an eatery located in a standalone building i.e. not being located inside any hotel, inn, guest house or club, is not eligible for availing ITC even if purchases made by it were in the course of and in furtherance of its business. Q.2. Would your answer be different if we are located in a hotel Ans. If a restaurant is located inside a hotel, inn, guest house, lodge or a club where room rent per day exceeds Rs 7500/-, the restaurant can avail ITC however GST rate in that case will be 18%. In other words, such a restaurant will have to charge GST at 18% which in the case mentioned in reply to question no 1 is 5%. Q.3. For the purpose of levy of GST on restaurant business, does it make any difference if it is an air conditioned or non air conditioned one Ans. No. The distinction between air conditioned and non air conditioned restaurant for the purpose of GST rate is now done away with. Therefore, prescribed GST rate in both cases is 5% without ITC and 18% with ITC. Q.4. Whether a restaurant owner can apply for composition scheme under GST If yes what is the tax rate Ans. Yes, a restaurant service provider may opt for composition scheme in which case prescribed GST rate is 5%. Nevertheless, now since a uniform levy at 5% without ITC is adopted for all standalone restaurants, from that point of view it does not make any difference from the point of view of GST rate in respect of composition or normal scheme for restaurant business. Q.5. We are engaged in outdoor catering services, what are the GST implications for us Ans. For outdoor catering services, as of now the GST rate is 18% with ITC. Q.6. We are a moving restaurant providing over the counter take away services only with no sitting facilities to dine. Tell us the GST to be charged from our customers Ans. Restaurants or food joints providing takeaway food or parcel services only come under 5% with no ITC provision. Q.7. A restaurant is located inside a three star hotel with room rent of more than Rs 7500/- per day. The restaurant is also offering some sweets which may be ordered as a takeaway/parcel or may be consumed on a table in the restaurant itself. What are the GST implications on both situations Ans. Sweets attract 5% GST, so take away from the counter will attract 5% GST only. Whereas if sweets are consumed on a table in the restaurant itself then it will attract GST at 18% since restaurant is located inside a hotel with room tariff of Rs. 7500/- and above. Q.8. We are running a school. We have an inhouse canteen for the benefit of our staff and students. What are the GST implications on us in the two situations: (i) if we supply food and beverages to our staff and students ourselves. (ii) if we engaged a contractor for running the canteen and to provide food and beverages to our staff and students. Ans. In a recently concluded GST Council meeting on 31.12.18 it is clarified that in the situation (i) GST is exempt. In situation (ii) GST to be charged is 5%. In this case the contractor is liable to charge GST at 5%. CS Abhishek Goyal FCS, LLB