Is it mandatory to pay GST at restaurants? Read on to find out

GST composition Scheme: Goods and Services Tax (GST) rate for restaurants has been a topic of discussion for a long time and the concept of GST composition scheme is something that people visiting restaurants should know about if they want to skip unnecessary GST on bill. Restaurants are subject to either the 5 per cent GST rate with no ability to claim Income Tax Credit (ITC) or the 18 per cent GST rate with ITC claims under GST. This pricing is determined by the restaurant's location. For example, restaurants located within hotels where the room fee exceeds the specified amount would be subject to a higher GST rate. But there are certain scenarios where a consumer is not supposed to pay GST on the restaurant bill. Let’s understand the concept in detail.

What is GST Composition Scheme?

The composition levy is designed for small taxpayers whose turnover is up to Rs. 1.5 crore ( Rs 1 crore in the case of a few States). The objective of the composition scheme is to bring simplicity and reduce compliance costs for small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at the normal rate.

Restaurants under composition scheme

Restaurants that fall under the composition scheme are required to pay GST at a reduced rate of 5 per cent on their turnover, subject to the limits listed below:

-Turnover not to exceed Rs 1.5 crore (Rs 1 crore in case of special category States)

-Should not be engaged in any services other than a restaurant (special exception carved out for services like interest and exempt services)

-Restaurants cannot make an interstate outward supply of goods

-Cannot supply any items not taxable under GST such as alcohol.

-They cannot supply goods through an e-commerce operator

-Restaurants cannot avail any input tax credit

-They cannot collect taxes from the customer

What are the other conditions and restrictions of composition scheme?

The person exercising the option to pay tax under section 10 shall comply with the following other conditions namely–

a) he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him.

b) he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business

Advantages to restaurants under GST composition

-Excise on pastries, service tax on lodging and restaurants, VAT on restaurants, luxury tax on room rentals, and entertainment tax on ticket events.

-Credit for GST paid on purchases

-Entry tax on machinery, CST on interstate transactions, and duty on furniture and packaged foods were not authorised as a credit to restaurant proprietors. With GST, all taxes paid on such purchases are credited, unless they are compelled to pay taxes at a reduced rate.

-If the turnover does not exceed Rs 1.5 crore, the option to pay taxes under the composition scheme at 5 per cent is available.

-5 per cent Concessional Rate (no Input Tax Credit)

-Credit for food or outdoor catering if utilised in a related business.

How can customers check if they should pay GST on the bill?

-Visit the GST portal https://www.gst.gov.in.

-Tap on Search taxpayer and search composition taxpayer.

-Enter the GST number written on the restaurant bill.

-The customer will know whether the restaurant comes under a regular GST payer or is a composite payer.

-If it is a composite payer then remember not to pay the GST amount levied on the bill.

-On the other hand, if the hotel is under regular payer then customers have to pay the GST amount.

-If the restaurant is forcibly charging GST in the bill, then you can visit- https://gstcouncil.gov.in/grievance-redressal-committee-grc.

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