GST Registration for Restaurants

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GST Registration for restaurants is more important than ever. The reason is restaurants are booming everyday. Thanks to additional support of Food Startups such as Zomato and Swiggy. This leads to generation of business and therefore, the Government imposes various taxes.

In this article, we will cover GST Registration for Restaurants. In addition, we will also understand about some mandatory and optional registrations for Restaurants that can significantly aid your business.

Know about GST Registration

GST is a form of tax levied against goods and services and as per GST law, 2017, any person whose business turnover is above Rs. 40 Lakhs or above has to go for GST Registration. However, it may be applicable in some other conditions too.

In simple words, The Goods and Services Tax (GST) is a type of Indirect tax. The CGST and the SGST, which are the central GST and the State GST, respectively blend together to impose GST.

The primary goal of this tax structure is to manage the cascading effects of other indirect taxes. For instance, The GST on the supply of Electricity eliminates other indirect taxes, including service tax, excise duty, VAT, etc.

Types of GST 

There are four types of GST available in India

  1. SGST (State Goods and Services Tax).
  2. CGST (Central Goods and Services Tax).
  3. IGST (Integrated Goods and Services Tax).
  4. UTGST (Union Territory Goods and Service Tax)

Let’s get into each of these as these all are important for understanding as a Restaurant Business.

What does SGST (State Goods and Services Tax)mean?

The SGST tax applies to the supply of goods or services within a state. The SGST tax would include taxes such as VAT and luxury tax. It also includes service tax, central sales, entertainment tax, and entry tax. Thus, it means SGST applies to restaurants that do business in their state or city only and the State government charges tax on it.

What does CGST (Central Goods and Services Tax)mean?

Central Goods and Services Tax is the second type of tax  that applies under a comprehensive tax system known as Goods and Service Tax. The levy is very similar to VAT as it applies to the transfer of goods from a seller or buyer.

They are levied by the central government for intrastate movement of goods and services. Therefore, if you have GST Registration and your restaurant works intrastate you will also have to pay CGST along with SGST.

However, the combined tax rate of CGST and SGST does not exceed 14%.

What does IGST (Integrated Goods and Services Tax) mean?

IGST is only levied on interstate sales via the e-way bill linking it to GST at both states and Centre. The Central Government collects it and then distributes to state governments.

IGST offers relief to taxpayers by lowering the inter-state transaction costs for every Indian. Taxes are based on the destination of goods and services.

Now, we know about GST. Let’s look at the list of mandatory documents for GST Registration.

Documents required in GST Registration for Restaurants

You will need the following documents for registering under GST for restaurant business –

  • Firstly, Scanned copies of photo of the owner/proprietor of the restaurant
  • Secondly, Picture of the managing partner/designated Partner in case of partnership firm
  • Furthermore, If you are the owner of the property, ownership documents such as electricity bill, tax receipt/property receipt, or registry documents will be required.
  • In case property is on rent, then you need to provide a copy of your rent agreement/lease agreement, along with the electricity bill, in the name and signature of the owner.
  • You will also have to submit the copy of NOC (No Objection Certificate) from the owner in case of rented property.
  • Other documents required may include bank bare-Scanned bank statement/bank Passbook scan copy or canceled cheque containing Name and bank account number, MICR, IFSC, Branch details etc.

Now let us look at some FAQs related to GST registration for Restaurants.

What are GST Tax Rates for Restaurants?

The GST Tax rates are different for each restaurant model. However, the three main categories are as follows.

  • Firstly we have, Supply of food/drinks in the restaurant without AC and without the license to serve liquor attracts a GST Tax rate of 5% without input tax credit (ITC)
  • Secondly, Supply of food/drinks in the restaurant having AC facility during the whole year attracts a GST Tax rate of  5% with full Input Tax Credit (ITC)
  • Lastly, the GST Tax rate of 18% for Supply of food/drinks in an air-conditioned restaurant in 5 star or above-rated hotels. Similarly, restaurants here also get Input Tax Credit.

Are there any GST Returns filing in the restaurant or food business?

Yes, the restaurants also need to do GST Return Filing.  There are mainly three types of GST Returns for Restaurants.

  • Return 1 – Sales Return to be filed on 10th of every month.
  • Return No. 2- Purchase Return to be filed on 15th of every month.
  • Return 3- The consolidated return (Sales Return + Purchase Return) to be filed on 20th of every month.

Important Note- Restaurants also need to file Annual GST Return by 31st December of every year.

How to claim Input Tax Credit as a Restaurant?

Restaurants at hotels charging Rs 7500 per night or more are entitled to have input credit to certain rules without limitations. Besides, The proprietor of a restaurant would get input tax credit on the amount spent on the raw materials acquired. It is receivable only when the ultimate indirect tax obligation on goods received from consumers is computed.

Is there any other registration mandatory for starting a Restaurant Business?

The most important registration before starting any business in the Food Industry is FSSAI Registration. The Food Safety and Standards Authority of India is an autonomous body.

The prime aim of FSSAI is to monitor the food business and take necessary actions to stop the adulteration of foods. Therefore, it is mandatory for restaurants to have FSSAI Registration.

How to get GST Registration for Restaurants?

To apply for GST registration you need to apply through an application form on GST Portal. It involves various complex steps. Hence, it’s best to have professionals do it for you while you sit comfortably at your place and focus on other things.

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If you want any other guidance related to GST Registration and GST  Return Filing, please feel free to talk to our business advisors at 8881-069-069.

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