Because of the growing industry of hotels and restaurants, the government is quite strict regarding the taxation of this industry. Hence it is really important for the business owners who are in this industry to be aware about the tax levied on these industries. The very basic tax is the goods and services tax. After the change in the system of tax in 2017, goods and services tax is the primary law that levies on both the services as well as goods sellers. Therefore all those who crossed the GST registration limit for restaurants must get a GST registration for their business in order to save oneself from heavy fines and penalties. To know more regarding the GST registration limit for restaurants in India keep reading this write-up till the end.
What is GST Registration for Restaurants?
The goods and services tax registration which has been obtained by the restaurants who fall under the threshold limit of goods and services is called GST registration for restaurants. The limit set up by the goods and services tax law on the GST for restaurants is called the GST registration limit for restaurants. Those restaurants that cross this limit have to take mandatory goods and services tax registration. If it is found that even after falling under the GST registration limit for restaurants, such businesses do not have GST Registration then heavy fines can be levied on such businesses.
What is the GST Registration Limit for Restaurants?
In India we can see both types of restaurants, one which serves food only and other is providing food as well as stay services. One which is providing food basically comes under the business of selling goods and the one which provides stay services will come under the category of business which is providing both goods and services. The GST registration limit for restaurants varies whether the restaurant is a service provider or deals in goods. Given below is the GST limit for both the businesses those who provides services and those who provides goods:
Limit for Goods
The GST registration threshold limit of Rs. 20 lakhs was initially enforced for goods and services under the Goods and Services Act of 2017. It became apparent that this cab was hurting local businesses. In an effort to support these smaller companies, the government raised the threshold for those involved in the product trade. As of now, the barrier for businesses that deal in products is 40 lakhs. Notification No. 10/2019-Central Tax, which was released on March 7, 2019, increased the threshold from Rs. 20 lakhs to Rs. 40 lakhs.
Limit for Services
In general, businesses in India can be divided into two categories: those that offer services (such banking, healthcare, or education) and those that sell tangible commodities. Initially the turnover limit for goods and services is the same. However, the rules were changed in 2019. The GST registration barrier for products was increased, but the Rs 20 lakhs cap for service providers did not change.
Different GST Tax Slabs Applicable on Restaurants in India
The list of different types of restaurants with their tax slab is given below in the table:
| Category of Restaurants | Rate of Interest |
| Normal or composite outdoor catering available in hotels, where the cost of a room is at least ₹7,500 | 5% interest without ITC |
| Normal or composite outdoor catering available in hotels, where the cost of a room is at more than ₹7,500 | 18% interest with ITC |
| Hotels with restaurants, when the room rate is ₹ 7,500 or more | 18% interest with ITC |
| Hotels with restaurants, when the room rate is ₹ 7,500 or less | 5% interest without ITC |
| Independent outside food service providers | 5% interest without ITC |
| Standalone or independent restaurants | 5% interest without ITC |
| Railway or IRCTC | 5% interest without ITC |
| Drink or food without AC | 5% interest without ITC |
| Drink or food with AC | 5% interest with ITC |
| In 5-star hotel drinks or food with AC | 18% interest |
GST Composition Scheme for the Restaurants
The GST registration limit for restaurants in case of composition scheme is different from normal GST registration limit for restaurants. Some of the key points with respect to GST composition scheme for the restaurants are mentioned below in detail:
- Restaurants with a total annual turnover of up to ₹1.5 crores (₹75 lakhs for special category states) in the preceding financial year are eligible for the composition scheme.
- Restaurants that exclusively provide services can opt for the composition scheme.
- If a restaurant serves alcoholic beverages, it is not eligible for the composition scheme.
- Businesses opting for the composition scheme cannot make inter-state supplies or exports.
- Restaurants under the composition scheme cannot claim input tax credit on the taxes they have paid on their inputs.
- Tax should be paid at a fixed rate based on the annual turnover.
- The exact tax rate might differ depending on the type of restaurant, such as air-conditioned or non-air-conditioned.
- Instead of monthly returns, businesses under the composition scheme need to file quarterly returns.
- The scheme offers simplified compliance procedures, which reduces the administrative burden on smaller restaurants.
Is it Necessary to pay GST in Restaurants?
It depends whether a restaurant is registered under the GST composition scheme or normal GST. If the restaurant is having registration under normal GST then customers have to pay goods and services tax, but if it is registered under the GST composition scheme customers do not need to pay the goods and services tax. In short it depends on the category of registration the restaurant owns.
Conclusion
The significance of GST registration for restaurants in India is pivotal, especially post-2017. As the Goods and Services Tax impacts businesses selling goods and services. The GST registration limit for restaurants varies according to their nature of services or goods. For those in the services sector, the threshold remains at ₹20 lakhs, while for goods businesses, it’s ₹40 lakhs. Whether customers pay GST in restaurants depends on the type of GST registration the restaurant holds. Understanding these nuances is crucial for restaurant owners to ensure compliance with GST regulations and their respective taxation implications.
