GST on Food Services & Restaurant Business

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As we know that, the GST was first inaugurated in July 2017, restaurants could fall into three various rate slabs. If the restaurant did not have air conditioning, the GST indicted was 12%. For a restaurant with AC or a liquor license, 18% GST was applicable. For restaurants within five-star hotels, the GST rate was set at 28% and at that time, all Indian restaurants in India could take benefit of the input tax credit. In this article, we will discuss on GST on Food Services and its importance.

Before discussing over the crucial components related to GST on Food services first, we discuss the concept of GST.

Know about GST

GST is comprehended to be the Goods and Services Tax which is imposed on the supply of goods and services. The important matter of this taxation system is to regulate the cascading consequence of other indirect taxes. GST is compelled only on value extension at each stage. Although, GST Registration is significant for registering any business.

GST on Food Services

GST on food items in India can be 5%, 12% or 18% based on factors such as the organization type and location of restaurants or food service providers among others. Goods and services tax has renovated the VAT and Service tax regime on food services. Regardless, the point to note here is the service charge by restaurants is different from GST

Alcoholic beverages have applicable Value Added Tax, which is a state-level tax, therefore restaurants serving both food and alcoholic beverages will levy separate taxes with GST applying to food and non-alcoholic beverages; however, VAT will be charged on alcoholic beverages served. GST on food items is applicable to the purchase of items by the common man which currently features rates ranging from nil to 18% GST.

Impact of GST on Restaurant and Food Items

After the beginning of GST, a simplification of the bill was noticed by those eating out at restaurants, as restaurant GST rate replaced multiple taxes and cess such as VAT, Service Tax and Krishi Kalyan cess to nominate a few. Similarly, a decrease in the effective tax on restaurant bills was also evident to customers after GST implementation.

But the decline in the cost for those who are eating out was observed to be marginal at best. However, the service charge has not been influenced by GST and is still applied by the restaurant.

Extend due dates of Income Tax & GST Compliance of April-2021

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

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