GST compliance for Restaurants in India

GST compliance for Restaurants in India

Goods and Services Tax (GST) compliance for restaurants in India is governed by the Goods and Services Tax

Act, 2017. Here are some key aspects of GST compliance for restaurants:

1. Registration 

Restaurants in India are required to register for GST if their annual turnover exceeds the prescribed threshold. The threshold is currently INR 20 lakh for most states, while special category states have a lower threshold of INR 10 lakh. Registration can be done online through the GST portal by providing the necessary details and documents. Once registered, the restaurant will receive a unique Goods and Services Tax Identification Number (GSTIN).

2.  GST Rates

The GST rates applicable to restaurants depend on the type of establishment and the services they provide. There are mainly two types of restaurants based on their turnover and the availability of Input Tax Credit (ITC):

a. Non-AC Restaurants and Restaurants without the facility of serving alcohol: These restaurants fall under the composition scheme. Under this scheme, they pay GST at a lower rate (currently 5% as of September 2021) on their turnover. However, they are not allowed to claim Input Tax Credit (ITC) on the GST paid for their inputs.
b. AC Restaurants and Restaurants serving alcohol: These restaurants do not fall under the composition scheme. They pay GST at a standard rate (currently 18% as of September 2021) on their supplies of goods and services. These restaurants are eligible to claim ITC on the GST paid for their inputs, such as raw materials, rent, equipment, etc.

It's important to note that the GST rates and classification of restaurants may be subject to change based on government notifications. Therefore, it's advisable to check the latest rates at the GST portal or consult a tax professional for accurate information.

3. Invoicing and Record Keeping

Restaurants are required to issue GST-compliant invoices for their supplies of goods or services. The invoices should contain details such as the GSTIN of the restaurant and the customer, description of the goods or services, quantity, value, applicable GST rate, and the amount of GST charged. Proper record keeping is crucial, and restaurants should maintain books of accounts, invoices, and other relevant documents for a minimum period as specified by the GST Act.

4.  Filing GST Returns

Restaurants need to file regular GST returns to report their business transactions to the tax authorities. The key GST returns for restaurants include:

a. GSTR-1: This return contains details of outward supplies made by the restaurant. It needs to be filed either monthly or quarterly, depending on the turnover.
b. GSTR-3B: This is a summary return that includes details of sales, purchases, and GST liability. It is filed monthly and serves as a provisional return.
c. GSTR-9: This is an annual return that consolidates the information provided in GSTR-1 and GSTR-3B. It should be filed by all restaurants, except those registered under the composition scheme.
The due dates and frequency of filing returns vary based on the turnover and state-specific requirements. Failure to file returns or filing them inaccurately or late may attract penalties and interest.

5. Input Tax Credit (ITC)

Restaurants that are not under the composition scheme can claim ITC on the GST paid for goods and services used in their business operations. This includes items such as raw materials, kitchen equipment, rent, and other input expenses. However, there are certain conditions and restrictions for claiming ITC. For example, the supplier must have filed their GST returns and paid the taxes to be eligible for ITC. Restaurants must reconcile their purchases and expenses with the details provided by their suppliers in their GST returns to ensure accurate ITC claims.

6.  Compliance with E-invoicing and E-way Bill

Depending on the turnover and nature of the supply, restaurants may need to comply with e-invoicing and generate e-way bills for the transportation of goods. E-invoicing involves reporting invoices to a centralized portal, which then generates a unique invoice reference number (IRN) along with a QR code. E-way bills are electronic documents required for the movement of goods valued above a specified threshold. Compliance with these requirements aims to ensure the seamless integration of tax data and prevent tax evasion.

To ensure proper GST compliance, it is recommended that restaurant owners stay updated with the latest GST regulations and consult a qualified tax professional or chartered accountant. They can provide guidance on the specific requirements applicable to the restaurant's business and help ensure accurate compliance with GST laws.

 



 

Created & Posted by Pooja

Income Tax Expert at TAXAJ

 

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