GST Registration Limit for Restaurants

The Indian food service sector was worth Rs 1,48,353 crore in 2018-19, according to the National Restaurant Association of India's 2019 India Food Service Report, and is expected to increase at a CAGR of 15% to Rs 2,57,907 crore in 2022-2023.

Overview

Before the introduction of GST a restaurant’s bill comprised VAT, services tax, and service charge. However, after 2019, indirect taxes collected on the sale and purchase of goods and services in India have been absorbed by the GST Registration Limit regime of indirect taxation.

In most states, restaurants, like other enterprises with a revenue of more than ₹ 20 lakh, would be required to register for GST. If the yearly aggregate revenue of a restaurant in a special category state exceeds ₹10 lakhs, the restaurant must register for GST. Any restaurant with a lower annual revenue than this can also opt for voluntary GST registration.

GST Composition Scheme in the Restaurant Industry

If the total annual turnover of a restaurant is less than ₹ 100 lakh, it can register: https://reg.gst.gov.in/registration/ under the GST composition scheme. Restaurants that are registered under the GST composition system will be required to pay GST at a rate of 5% of total revenue, split into 2.5 percent SGST and 2.5 percent CGST. 

Furthermore, restaurants that make use of this scheme must ensure that any goods obtained from an unregistered source are subject to reverse charge GST. 

Steps for GST Registration

GST Registration Application (Form GST REG-01): Initiate the process by completing the GST registration application using the prescribed Form GST REG-01.

• Commence on the GST Portal: Visit the GST Portal to kickstart the registration process. Input crucial details such as your mobile number, email address, and, significantly, your PAN.
• OTP Verification: Verify your identity through One-Time Passwords (OTPs) sent to your registered mobile number and email address. This step ensures the accuracy and security of your registration details.
• Document Submission: Following successful OTP validation, submit the necessary documents. These documents are scrutinised by the authorities as part of the registration process.
• Authorities’ Scrutiny: The submitted documents undergo careful review by the relevant authorities. Upon approval, they issue the GST registration certificate for your restaurant, marking the official inclusion into the GST framework.

Voluntary Registration Possibilities

While the threshold exists, businesses have the option of voluntary registration, regardless of their turnover. Should a restaurant choose to register voluntarily, a set of procedural requirements must be diligently followed to ensure seamless compliance.

Basic Exemption Threshold for Restaurant Service

Under GST regulations, the basic exemption threshold for restaurant services stands at ₹ 20 lakh. However, there’s a nuanced provision for restaurants and hotels in northeastern states, where the threshold is set at ₹ 10 lakh. This exemption serves as a financial benchmark, determining whether businesses fall under the GST ambit.

You can use our GST calculator to know how much GST you owe before you register.

Input Tax Credit (ITC) for Restaurant Businesses

• The stock invoice must not be older than 12 months.
• The supplier must be a registered dealer.
• The stock should be intended for use in a taxable supply.
• The tax duty must have been paid, supported by appropriate documents.
• The credit must be eligible under the provisions of the GST law.

GST Registration Limit for Restaurants

Benefits of GST Registration for Restaurants

One Tax, Less Hassle

Before GST, restaurants were tangled in a web of different taxes. This included luxury taxes on rooms, excise duties on pastries, entertainment taxes on events, VAT on dining, and service taxes on lodging and dining. Calculating, collecting, and filing returns for each of these was a complex and time-consuming process.

GST simplifies this by replacing all these multiple taxes with a single, unified tax. Restaurants now only need to deal with one tax law, making compliance much easier and reducing the administrative burden significantly. This saves time and resources, allowing restaurant owners to focus more on running their business.

Recover Your Input Taxes

Restaurants often make purchases like furniture, machinery, and ingredients, which are subject to various taxes such as excise duty and entry tax. Previously, these taxes were a sunk cost.

With GST, you can claim credit for these taxes paid on purchases (known as Input Tax Credit). This means you can reduce your overall tax liability by offsetting the taxes you’ve already paid. It’s like getting a refund on the taxes you spent on running your business. This helps improve cash flow and increases profitability.

GST Composition Scheme Rules for Restaurants

Want to simplify your taxes? The GST Composition Scheme might be for you. If your restaurant’s yearly sales are under ₹1.5 crores (₹1 crore in specific states), you can pay a flat 5% GST instead of dealing with complicated tax calculations.

But there are rules:

• Focus on food: Your business should mainly be about serving food. Other services like interest charges are allowed, but your core business must be food.
• Stay local: You can’t sell food to other states. All your customers should be within your state.
• No online sales: You can’t use platforms like Swiggy or Zomato to sell your food.
• Stick to food: You can’t sell items that aren’t taxed under GST, like alcohol.
• Pay it all: Unlike the regular GST scheme, you can’t claim tax credits on purchases.
• No extra charges: You can’t charge your customers separate GST. The 5% is included in your prices.

Remember: This scheme is simpler, but it also has limitations. Weigh your options carefully to see if it’s right for your restaurant.

Record Keeping for Restaurants Under GST

Running a restaurant is busy, but keeping your financial records straight is essential. With GST, it’s even more important.

Here’s what you need to track:

• Every bill you send out: Make sure you keep a copy of each bill you give to customers. This includes details like what you sold, how much it cost, and the GST charged.
• All the GST you collect: Keep a close eye on the GST money you get from customers. You’ll need to report this to the tax department.
• Your business expenses: From the rent you pay to the food you buy, keep records of everything you spend. This includes bills for electricity, equipment, and other costs.

How long should you keep these records? Hold onto them for at least six years. You might need them for tax audits or other checks.

By keeping detailed and accurate records, you’ll not only stay on top of your taxes but also have a clear picture of your restaurant’s finances. This helps you make smart business decisions.

GST Return Filing for Restaurants

Running a restaurant means juggling many things, and taxes are definitely one of them. GST returns are a regular task you’ll need to handle.

How often do you need to file? That depends on how much your restaurant earns each year.

• GSTR-1: This is like a sales report. You list all the food and drinks you sold. How often you file depends on your sales.
• GSTR-3B: This is a summary of your sales and expenses. You pay the GST you owe here. You need to file this every month.
• GSTR-9: This is a yearly recap of everything. It’s like a yearly summary of all the numbers from your monthly reports.

Keeping up with these returns might seem complex, but it’s essential for staying compliant and avoiding any tax troubles. Understanding these returns is the first step to managing your restaurant’s finances effectively.

Key Points for GST Payment:

Figuring out how much GST to pay can be tricky. You need to calculate it based on how much your restaurant earned (minus any tax-free items). Keep detailed records of your sales to get this right.

• When do you pay? It depends on how much you earn. If your restaurant makes less than a certain amount, you pay every three months. Otherwise, it’s monthly.
• How to pay? You’ll need to create a special online form called a GST challan. This tells the government how much you owe and when you’ll pay it.
• Be on time! If you’re late, you’ll have to pay interest – that’s extra money you owe. You might also get fined.
• Good news: You can often subtract the GST you paid on things like food, electricity, and rent from the GST you owe. This is called Input Tax Credit and can save you money.

Frequently Asked Questions

Also, Read

• Apply for New GST Number
• How to track GST Application status?
• Address Proof for GST Registration