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.
GST on Restaurants- All you needs to know