Since GST has been implemented, various industry-specific issues have been constantly arising and Restaurants are one of them. There have been various viewpoints regarding taxation of supplies by restaurants under GST. After GST being imposed, various restaurants increased their prices justifying it to be the effect of GST. Making an end to all the controversies, the government finally came to certain conclusions in 23rd GST Council Metting to end all the ill-practices being undertaken by restaurants and to further clarify the tax structure on restaurants.

Following rates have been finally decided for restaurants making supplies as mentioned below

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Category Rate of GST
Restaurants Under Composition scheme 5% of Turnover
All stand alone restuarants ( Air-conditioned or otherwise) 5% (Without ITC)
Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day 5% (Without ITC)
Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) 18% (Full ITC)
Takeaways from restaurants Same rate shall be applicable on takeaways as well as is applicable on comsumption of food at that particular restaurant
Outdoor Catering 18% (Full ITC)

Notification No. 11/2017-Central Tax (Rate) notifies the rate for various services. Serial No.7 in the provided notification discusses about Accommodation, food and beverage services being provided under Heading 9963.

Notification No.46/2017 - Central Tax (Rate) was notified by CBEC on 14th November wherein the changes in rate for restaurant services was notified as discussed in GST council meeting. As per this notification all standalone restaurants (Restaurants which are not located in the premises of any hotels, inns, guest houses, clubs, campsites or any other commercial place meant for residential or lodging purpose) and restaurants having tariff of any unit less thanRs 7500 shall charge GST at the rate of 5% provided the specified condition of not taking ITC of inputs is being fulfilled.
The relevant provision to be quoted in respect of the condition is :

Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,-
(a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and
(b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder.

If any restaurant falling in the above category violates the condition specified above, then the GST at the rate of 18% shall be charged and then Input Tax Credit shall also be available.

Further, the notification specified that restaurants located in the premises of any hotels, inns, guest houses, clubs, campsites or any other commercial place meant for residential or lodging purpose where the tariff of any unit is equal to or above Rs 7500, then GST at the rate of 18% shall be charged.

It has also been clarified that even if restaurants are delivering the food or food is being taken from restaurants as takeaway then also any special rate shall not be applicable on such supplies and the rate which the restaurant is charging for within-premises consumption shall be chargeable on such deliveries or takeaways.

In the current scenario, there is no restaurant service on which GST at the rate of 28% is applicable and liquor for human consumption being outside the purview of GST is leviable to local taxes as per state tax laws.

Further restaurants looking for any special consultancy regarding any specific query can mail us at support@taxgrid.in and if you have any educational query please post it in our forums at https://taxgrid.in/forums/forum/gst-queries/  or comment below!