CA Dilip Jain

CA Dilip Jain

Schedule II u/s 7 of CGST Act incorporates activities to be treated as supply of goods or supply of services.

  • As per clause 6(b) of Schedule II, Restaurant services are specified as composite supply and have been defined as follows:- “Supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration”.
  • As per clause 6(b) of Schedule II, tax under GST regime will be leviable as supply of services,not as supply of goods on transaction value i.e. the consideration paid or payable.
  • No tax will be payable on the goods supplied by the Restaurants to the customers as Restaurant services have been specified as composite service.
  • The supplier of Restaurant services will be entitled to input tax rebate on the inputs, capital goods and input services used by them in the course or furtherance of business.
  • In Case of AC RESTAURANTS , GST will be levied @ 18%.
  • AS Alcoholic liquor is out of GST, an restaurant supplying it will be required to take VAT Registration and issue separate bill.

Composition under GST regime for supply of Restaurant services :

  • As per Section 10(1)(b) of CGST / SGST Act, the Restaurant service provider whose aggregate turnover in a previous financial year does not exceed Rs.50 lacs shall pay tax @2.5% as CGST and 2.5% as SGST totalling 5%, which is as under:- “(b) two and a half per ,cent of the turnover in State in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II”.
  • The composition Restaurant suppliers will not be entitled to input tax credit.
  • The composition u/s 10 of CGST Act/ SGST Act is subject to provisions of Section (3) and (4) of Section 9. It means that composition persons will pay tax at full rate on reverse charge basis, if they get supplies from notified suppliers of goods / services and from unregistered persons in excess of Rs 5000 per day. Restaurant Service providers have to buy the goods and services from the unregistered persons in the course of nature of services provided by them. This will result in unnecessary burden on restaurant service providers on unregistered inward supplies .This will make the provisions contain in Section 10 of GST laws impractical and redundant.

More Under Goods and Services Tax

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Category : Goods and Services Tax (3984)
Type : Articles (13666)
Tags : goods and services tax (2549) GST (2134)

4 responses to “Tax liability on AC Restaurants under GST regime”

  1. CA.Govind Agrawal says:

    If The Restaurant is Opting for Composition Scheme
    and sales soft drinks across the counter how the same will be billed to customers

  2. Sushant Sharma says:

    Dear Bijay,
    Let me answer your query with an example:

    Lets Suppose food Bill Is 80/- And Soft Drink Bill is 20/- .
    Total 100

    Now 18% (9% CGST+ 9% SGCT ) will be charged on 80 Rs whereas soft-drinks will be sold on MRP Basis.(eg 20/- which itself includes GST @ 28% and Compensation Cess @ 12%) .

    So by this there will be no cascading effect on the same.

    Thanks.

    • Bijay Shrestha says:

      Thanks Sushant.
      But As per Schedule II of CGST Act, In No. 6, it is mentioned that ” Composite supply
      The following composite supplies shall be treated as a supply of services, namely:—
      (a) …………………… and
      (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.”

      In my view Restaurant Service falls under this category. And if it is specifically falls under service category, it should charge flat 18%.

      Only if Soft drinks are sold separately retail traders , then they should charge 28% GST and 12% Cess.

      Please suggest.

  3. Bijay Shrestha says:

    Restaurants are charged @ 18% GST on total Invoice value. If Invoice to customers also includes soft drinks (which attracts GST @ 28% and Compensation Cess @ 12%), Can the Restaurant charge Separately for that Soft Drinks including GST @ 28% & CESS @ 12%? OR they should charge flat 18% on Total Invoice Value?

    When the restaurant bought soft drinks, it may have paid both GST and Cess.

    If they charge flat 18%, then Cess they have paid for purchase of those Soft Drinks becomes cost to the Restaurant and Cascading effect will be there.

    Please suggest.

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