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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.

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Prior to 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 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 restaurants with a lower annual revenue than this can also opt for voluntary GST registration.

Restaurants at starred hotels that have a daily room cost of ₹7,500 would be charged 18% GST, and they will be eligible for ITC. Restaurants at hotels that charge less than ₹7,500 per night will be charged 5% GST but will not be eligible for ITC.

GST Registration in the Restaurant Industry

Once all of the paperwork necessary for GST registration has been gathered, the following steps must be completed.

  1. Application for GST Registration: To begin, fill out Form GST REG – 01 to apply for GST registration. After that, you’ll be prompted to upload the papers and sign them using your digital signature.
  2. Verification of Documents: After you submit your application, a department officer will review it. If all of your papers are confirmed to be genuine, he or she will issue you a registration certificate; otherwise, your application may be refused.
  3. Obtain GSTIN and download registration certificate: The department will then issue your GSTIN and registration certificate.

GST Composition Scheme in the Restaurant Industry

If the total annual turnover of a restaurant is less than ₹ 100 lakh, it can register 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. 

The value of all taxable supplies, exempt supplies, and exports produced by all people with the same PAN will be included in aggregate turnover, but it will exclude inbound supplies under reverse charge, as well as central, state/union territory, and integrated taxes and cess.

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

Reverse charge is a taxation system in which the tax is levied on the receiver rather than the provider.
Category of Restaurants GST Rate
1 Railways/IRCTC 5% without ITC
2 Standalone restaurants 5% without ITC
3 Standalone outdoor catering services 5% without ITC
4 Restaurants within hotels (Where room tariff is less than Rs 7,500) 5% without ITC
5 Normal/composite outdoor catering within hotels (Where room tariff is less than ₹ 7,500) 5% without ITC
6 Restaurants within hotels (Where room tariff is more than or equal to ₹ 7,500) 18% with ITC
7 Normal/composite outdoor catering within hotels* (Where room tariff is more than or equal to ₹7,500) 18% with ITC

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