A PROJECT ON

"IMPACT OF GST IN RESTAURANTS"

Submitted to

University Of Mumbai For Partial Completion Of Degree

Of

Bachelor Of Commerce (Accounting And Finance)

Semester VI 2018-19

Submitted By:

Roll No.516

Under the Guidance of

Professor: VAISHALI BEHERE

Uttari Bharat Sabha’s

RAMANAND ARYA D.A.V. COLLEGE

DATAR COLONY BHANDUP (E), MUMBAI- 400042.

March,2018-19
1
 A PROJECT ON

"IMPACT OF GST IN RESTAURANTS"

Submitted to

University Of Mumbai For Partial Completion Of Degree

Of

Bachelor Of Commerce (Accounting And Finance)

Semester VI 2018-19

Submitted By:

Roll No.516

Under the Guidance of

Professor: VAISHALI BEHERE

Uttari Bharat Sabha’s

RAMANAND ARYA D.A.V. COLLEGE

DATAR COLONY BHANDUP (E), MUMBAI- 400042.

2
 March, 2018-19

Uttari Bharat Sabha’s

RAMANAND ARYA D.A.V. COLLEGE

DATAR COLONY BHANDUP (E), MUMBAI- 400042.

2018-19

CERTIFICATE

This is to certify that - Roll No.-have worked and duly completed his project work for the degree
of Bachelor of Commerce (Accounting & Finance) under the faculty of commerce in the subject
of management and his project is entitled,“IMPACT OF GST IN RESTAURANTS" under the
supervision. I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any degree of diploma of any University.

It is his own work and facts reported by his personal findings and investigation.

Date -____________

Course Co-coordinator Principal

Mrs. Chandrakala Srivastava Dr. Ajay Bhamare

Project Guide / Internal Examiner External Examiner

3
 Declaration by Learner

I the undersigned Mr. here by, declare that the work embodied in this project work
titled “IMPACT OF GST IN RESTAURANTS”, forms my own contribution to
the research work carried out under the guidance of Mrs.VAISHALI BEHEREis a
result of my own research work and as not been previously submitted to any other
University for any other Degree / Diploma to this or any other University.

Wherever reference has been made to previous work of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained
and presented in accordance with acedamic rules and ethical conduct.

Name & Signature of the learner

ROHAN VASANT MANE

Certified By

Name & Signature of the Guiding Professor

Mrs.VAISHALI BEHERE

4
 Acknowledgement

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.

I would like to thank my Principal, Mr. Ajay Bhamre for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Mrs. Chandrakala Shrivastava for
her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Mr/Mrs. Vaishali Behere whose guidance and care made the project successful.

I would like to thank College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly and indirectly
helped me in the completion of the project especially my parents and peers who
supported me throughout my project.

5
 IMPACT OF
GST IN
RESTAURANTS

6
 Index
SERIALNO. CHAPTER PAGE NO.

1 INTRODUCTION OF GST 8

2 RESEARCH METHODOLOGY OF GST 24

IN RESTAURANTS

3 REVIEW LITERATURE OF GST IN 26

RESTAURANTS

4 ANALYSIS AND PRESENTATION OF GST 65

IN RESTAURANTS

5 CONCLUSION 76

7
 1. INTRODUCTION OF GST

1.1 HISTORY.

1.2 DEFINATION OF GST.

1.3 MAIN FEATURES OF GST

1.4 SCOPE OF GST

1.5 BENEFIT OF GST

1.6 TYPES OF GST

 CENTRAL GOODS AND SERVICE TAX

 STATE GOODS AND SERVICE TAX
 INTEGRATED GOODS AND SERVICE TAX
 UNION TERRITORY GOODS AND SERVICE TAX
1.7 DIFFERENCE BETWEEN DIFFERENT TYPES OF GST TAXES
1.8 GST OBJECTIVES

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 1.1History

The implementation of the Goods and Services Tax (GST) in India was a historical move, as it
marked a significant indirect tax reform in the country. The amalgamation of a large number of
taxes (levied at a central and state level) into a single tax is expected to have big advantages .One
of the most important benefit of the move is the mitigation of double taxation or the elimination
of the cascading effect of taxation. The initiative is now paving the way for a common national
market. Indian goods are also expected to be more competitive in international and domestic
markets post GSTimplementation.
From the viewpoint of the consumer, there would be a marked reduction in the overall tax
burden that is currently in the range of 25% to 30%. The GST, due to its self-policing and
transparent nature, is also easier to administer on an overall scale.

When did GST start?

Several countries have already established the Goods and Services Tax. In Australia, the system
was introduced in 2000 to replace the Federal Wholesale Tax. GST was implemented in New
Zealand in 1986. A hidden Manufacturer’s Sales Tax was replaced by GST in Canada, in the
year 1991. In Singapore, GST was implemented in 1994. GST is a value-added tax in Malaysia
that came into effect in 2015.

History of GST in India

 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee (EC) to
create a structure for GST, based on their experience in designing State VAT. Representatives
from the Centre and states were requested to examine various aspects of the GST proposal and
create reports on the thresholds, exemptions, taxation of inter-state supplies, and taxation of
services. The committee was headed by Asim Dasgupta, the finance minister of West Bengal.
Dasgupta chaired the committee till 2011.

 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance
ministry, indicated that the existing tax structure had many issues that would be mitigated by
the GST system.

 February 2005: The finance minister, P. Chidambaram, said that the medium-to-long
term goal of the government was to implement a uniform GST structure across the country,
covering the whole production-distribution chain. This was discussed in the budget session for
the financial year 2005-06

9
 .
 February 2006: The finance minister set 1 April 2010 as the GST introduction date.

 November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that

states will have to prepare and make reforms for the upcoming GST regime.

 February 2007: The 1 April 2010 deadline for GST implementation was retained in the
union budget for 2007-08.

 February 2008: At the union budget session for 2008-09, the finance minister confirmed
that considerable progress was being made in the preparation of the roadmap for GST. The
targeted timeline for the implementation was confirmed to be 1 April 2010.

 July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic
skeleton of the GST system. The 1 April 2010 deadline was being followed then as well.

 November 2009: The EC that was headed by Asim Dasgupta put forth the First
Discussion Paper (FDP) , describing the proposed GST regime. The paper was expected to
start a debate that would generate further inputs from stakeholders.

 February 2010: The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised
commercial taxes in states. Following this, the implementation of GST was pushed by one
year.

 March 2011: The government led by the Congress party puts forth the Constitution
(115th Amendment) Bill for the introduction of GST. Following protest by the opposition
party, the Bill was sent to a standing committee for a detailed examination.

 June 2012: The standing committee starts discussion on the Bill. Opposition parties raise
concerns over the 279B clause that offers additional powers to the Centre over the GST
dispute authority.

 November 2012: P. Chidambaram and the finance ministers of states hold meetings and
set the deadline for resolution of issues as 31 December 2012.

 February 2013: The finance minister, during the budget session, announces that the
government will provide Rs.9,000 crore as compensation to states He also appeals to the state
finance ministers to work in association with the government for the implementation of the
indirect tax reform
.
 August 2013: The report created by the standing committee is submitted to the
parliament. The panel approves the regulation with few amendments to the provisions for the
tax structure and the mechanism of resolution.

10
 October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of
Rs.14,000 crore per annum, owing to the destination-based taxation rule.
 May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra
Modi was voted into power at the Centre.

 December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution
(122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be
sent for discussion to the standing committee.

 February 2015: Jaitley, in his budget speech, indicated that the government is looking to
implement the GST system by 1 April 2016.

 May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also
announced that petroleum would be kept out of the ambit of GST for the time being.

 August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the
disruption had no specific cause.

 March 2016: Jaitley says that he is in agreement with the Congress’s demand for the
GST rate not to be set above 18%. But he is not inclined to fix the rate at 18%. In the future if
the Government, in an unforeseen emergency, is required to raise the tax rate, it would have to
take the permission of the parliament. So, a fixed rate of tax is ruled out.

 June 2016: The Ministry of Finance releases the draft model law on GST to the public,
expecting suggestions and views.

 August 2016: The Congress-led opposition finally agrees to the Government’s proposal
on the four broad amendments to the Bill. The Bill was passed in the Rajya Sabha.

 September 2016: The Honourable President of India gives his consent for the
Constitution Amendment Bill to become an Act.

 2017: Four Bills related to GST become Act, following approval in the parliament and
the President’s assent:
 Central GST Bill
 Integrated GST Bill
 Union Territory GST Bill
 GST (Compensation to States) Bill

11
The GST Council also finalised on the GST rates and GST rules. The Government declares that the GST Bill
will be applicable from 1 July 2017, following a short delay that is attributed to legal issues.

12
1.2 Definition of GST
“GST is a tax on goods and services with value addition at each stage
having comprehensive and continuous chain of set of benefits from the  producer’s / service
provider’s point up to the retailers level where  only the final consumer should bear the
tax.”

Goods and Services Tax (India)

Goods and Services Tax (GST) is an indirect tax (or consumption tax) levied in India on the
supply of goods and services. GST is levied at every step in the production process, but is meant
to be refunded to all parties in the various stages of production other than the final consumer.
Goods and services are divided into five tax slabs for collection of tax - 0%, 5%, 12%,18% and
28%. However, Petroleum products, alcoholic drinks, electricity, are not taxed under GST and
instead are taxed separately by the individual state governments, as per the previous tax regime.
[citation needed]
 There is a special rate of 0.25% on rough precious and semi-precious stones and 3%
[1]
on gold.  In addition a cessof 22% or other rates on top of 28% GST applies on few items like
aerated drinks, luxury cars and tobacco products.[2] Pre-GST, the statutory tax rate for most
goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.
The tax came into effect from July 1, 2017 through the implementation of One Hundred and First
Amendment of the Constitution of India by the Indian government. The tax replaced existing
multiple cascading taxes levied by the central and state governments.
The tax rates, rules and regulations are governed by the GST Council which consists of the
finance ministers of centre and all the states. GST is meant to replace a slew of indirect taxes
with a unified tax and is therefore expected to reshape the country's 2.4 trillion dollar economy,
but not without criticism.[3] Trucks' travel time in interstate movement dropped by 20%, because
of no interstate check posts.[4]
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service
Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July
2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based
tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods
and services. This law has replaced many indirect tax laws that previously existed in India.
GST is one indirect tax for the entire country.
So, before Goods and Service Tax, the pattern of tax levy was as follows:

13
Under the GST regime, the tax will be levied at every point of sale. In case of intra-state sales,
Central GST and State GST will be charged. Inter-state sales will be chargeable to Integrated
GST.
Now let us try to understand the definition of Goods and Service Tax – “GST is
a comprehensive, multi-stage, destination-based tax that will be levied on every value
addition.”

1.3 Main Features of GST

 (i) GST would be applicable on “supply” of goods or services as against the present

concept of tax on the manufacture of goods or on sale of goods or on provision of
services.
 (ii) GST would be based on the principle of destination based consumption taxation as
against the present principle of origin-based taxation.
 (iii) It would be a dual GST with the Centre and the States simultaneously levying it on a
common base. The GST to be levied by the Centre would be called Central GST (central
tax- CGST) and that to be levied by the States [including Union territories with
legislature] would be called State GST (state tax- SGST). Union territories without
legislature would levy Union territory GST (union territory tax- UTGST).
 (iv) An Integrated GST (integrated tax- IGST) would be levied on inter-State supply
(including stock transfers) of goods or services. This would be collected by the Centre so
that the credit chain is not disrupted.

14
  (v) Import of goods would be treated as inter-State supplies and would be subject to
IGST in addition to the applicable customs duties.
 (vi) Import of services would be treated as inter-State supplies and would be subject to
IGST.
 (vii) CGST, SGST /UTGST& IGST would be levied at rates to be mutually agreed upon
by the Centre and the States under the aegis of the GSTC.
 (viii) GST would replace the following taxes currently levied and collected by the Centre:
Page 5 of 11
o a) Central Excise Duty;
o b) Duties of Excise (Medicinal and Toilet Preparations);
o c) Additional Duties of Excise (Goods of Special Importance);
o d) Additional Duties of Excise (Textiles and Textile Products);
o e) Additional Duties of Customs (commonly known as CVD);
o f) Special Additional Duty of Customs (SAD);
o g) Service Tax;
o h) Cesses and surcharges insofar as they relate to supply of goods or services.
 (ix) State taxes that would be subsumed within the GST are:
o a) State VAT;
o b) Central Sales Tax;
o c) Purchase Tax;
o d) Luxury Tax;
o e) Entry Tax (All forms);
o f) Entertainment Tax (except those levied by the local bodies);
o g) Taxes on advertisements;
o h) Taxes on lotteries, betting and gambling;
o i) State cesses and surcharges insofar as they relate to supply of goods or services.
 (x) GST would apply to all goods and services except Alcohol for human consumption.
 (xi) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural
gas) would be applicable from a date to be recommended by the GSTC.
 (xii) Tobacco and tobacco products would be subject to GST. In addition, the Centre
would continue to levy Central Excise duty.

(xiii) A common threshold exemption would apply to both CGST and SGST. Taxpayers
with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States (except J&K) as
specified in article 279A of the Constitution) would be exempt from GST. A compounding
option (i.e. to pay tax at a flat rate without credits) would be available to small taxpayers
(including to manufacturers other than specified category of manufacturers and service
providers) having an annual turnover of up to Rs. 75 lakh (Rs. 50 lakh for special category States
(except J&K and Uttarakhand) enumerated in article 279A of the Constitution). The threshold
exemption and compounding scheme would be optional.

15
 (xiv) The list of exempted goods and services would be kept to a minimum and it would
be harmonized for the Centre and the States as well as across States as far as possible.
 (xv) All Exports and supplies to SEZs and SEZ units would be zero-rated.
 (xvi) Credit of CGST paid on inputs may be used only for paying CGST on the output
and the credit of SGST/UTGST paid on inputs may be used only for paying
SGST/UTGST. In other words, the two streams of input tax credit (ITC) cannot be cross
utilized, except in specified circumstances of inter-State supplies for payment of IGST.
The credit would be permitted to be utilized in the following manner:
o a) ITC of CGST allowed for payment of CGST & IGST in that order;
o b) ITC of SGST allowed for payment of SGST & IGST in that order;
o c) ITC of UTGST allowed for payment of UTGST & IGST in that order;
o d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that
order. ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.
 (xvii) Accounts would be settled periodically between the Centre and the State to ensure
that the credit of SGST used for payment of IGST is transferred by the originating State
to the Centre. Similarly the IGST used for payment of SGST would be transferred by
Centre to the destination State. Further the SGST portion of IGST collected on B2C
supplies would also be transferred by Centre to the destination State. The transfer of
funds would be carried out on the basis of information contained in the returns filed by
the taxpayers.
 (xviii) Input Tax Credit (ITC) to be broad based by making it available in respect of taxes
paid on any supply of goods or services or both used or intended to be used in the course
or furtherance of business.
 (xix) Electronic filing of returns by different class of persons at different cut-off dates.
 (xx) Various modes of payment of tax available to the taxpayer including internet
banking, debit/ credit card and National Electronic Funds Transfer (NEFT) / Real Time
Gross Settlement (RTGS).
 (xxi) Obligation on certain persons including government departments, local authorities
and government agencies, who are recipients of supply, to deduct tax at the rate of 1%
from the payment made or credited to the supplier where total value of supply, under a
contract, exceeds two lakh and fifty thousand rupees. The provision for TDS has not been
notified yet. Page 7 of 11
 (xxii) Refund of tax to be sought by taxpayer or by any other person who has borne the
incidence of tax within two years from the relevant date.
 (xxiii) Obligation on electronic commerce operators to collect ‘tax at source’, at such
rate not exceeding two per cent. (2%) of net value of taxable supplies, out of
payments to suppliers supplying goods or services through their portals. The
provision for TCS has not been notified yet.

16
  (xxiv) System of self-assessment of the taxes payable by the registered person.
 (xxv) Audit of registered persons to be conducted in order to verify compliance with the
provisions of Act.
 (xxvi) Limitation period for raising demand is three (3) years from the due date of filing
of annual return or from the date of erroneous refund for raising demand for short-
payment or non-payment of tax or erroneous refund and its adjudication in normal cases.
 (xxvii) Limitation period for raising demand is five (5) years from the due date of filing
of annual return or from the date of erroneous refund for raising demand for short-
payment or non-payment of tax or erroneous refund and its adjudication in case of fraud,
suppression or willful mis-statement.
 (xxviii) Arrears of tax to be recovered using various modes including detaining and sale
of goods, movable and immovable property of defaulting taxable person.
 (xxix) Goods and Services Tax Appellate Tribunal would be constituted by the Central
Government for hearing appeals against the orders passed by the Appellate Authority or
the Revisional Authority. States would adopt the provisions relating to Tribunal in
respective SGST Act.
 (xxx) Provision for penalties for contravention of the provision of the proposed
legislation has been made.
 (xxxi) Advance Ruling Authority would be constituted by States in order to enable the
taxpayer to seek a binding clarity on taxation matters from the department. Centre would
adopt such authority under CGST Act.
 (xxxii) An anti-profiteering clause has been provided in order to ensure that business
passes on the benefit of reduced tax incidence on goods or services or both to the
consumers.
 (xxxiii) Elaborate transitional provisions have been provided for smooth transition of
existing taxpayers to GST regime.

1.4 Scope of GST

 GST shall cover all goods and services, except alcoholic liquor for human consumption,
for the levy of goods and services tax. In case of petroleum and petroleum products, it has
been provided that these goods shall not be subject to the levy of Goods and Services Tax
till a date notified on the recommendation of the Goods and Services Tax Council.

Promulgation of GST Council: Proposed Article 279A of the Bill provides for constitution of

Goods and Services Tax Council to examine issues relating to goods and services tax and make
recommendations to the Union and the States on parameters like rates, exemption list and
threshold limits. The Council shall function under the Chairmanship of the Union Finance
Minister and will have the State Union Minister as its members.

17
  All goods and services are covered under GST Regime except Alcoholic liquor for
Human Consumption,
 Tobacco Products subject to levy of GST and Centre may also levy excise duty
 GST Council yet to decide the incidence and levy of GST on following;
o a)Crude Petroleum
o b)High Speed Diesel (HSD)
o c)Motor Spirit (Petrol)
o d)Natural Gas
o e)Aviation Turbine Fuel

1.5 Benefits of GST

GST will bring numerous benefits to all stakeholders viz industries, government and
citizens. Some of these benefits are listed below:

Seamless Flow of Credit: GST will facilitate seamless credit across the entire supply
chain and across all States under a common tax base.

Elimination of Cascading effect: Goods & Service Tax would eliminate the cascading
effects of taxes on production and distribution cost of goods and services. The
exclusion of cascading effects i.e. tax on tax will significantly improve the
competitiveness of original goods and services in market will lead to beneficial impact
to the GDP growth of the country. It is felt that GST would serve a superior reason to
achieve the objective of streamlining indirect tax regime in India which can remove
cascading effects in supply chain till the level of final consumers.

Revenue Gain: Revenue will increase under GST regime because of widening of the
dealer base by capturing value addition in the distributive trade and increased
compliance.

Enhanced Transparency: GST regime shall enhance transparency in the indirect tax

framework and is expected to bring down the rate of inflation.

 Zero rated Exports: Under the GST regime, exports will be zero rated in entirety unlike
the present system where refund of some taxes is not allowed due to fragmented nature of
indirect taxes between the Centre and the States. All taxes paid on the goods or services
exported or on the inputs or input services used in the supply of such export goods or
services shall be refunded.

18
 GST will boost Indian exports, thereby improving the balance of payments position.
Exporters will be facilitated by grant of provisional refund of 90% of their claims within
seven days of issue of acknowledgement of their application, thereby resulting in the
easing of position with respect to cash flows.

 Increased Uniformity: Uniform GST rates will reduce the incentive for evasion by

eliminating rate arbitrage between neighbouring States and that between intra and inter-
State sales. Harmonization of laws, procedures and rates of tax will make compliance
easier and simple.

 There would be common definitions, common forms/formats, common interface through

GST portal, resulting in efficiencies and synergies across the board. This will also
remove multiple taxation of same transactions and inter-State disputes like the ones on
entry tax and e-commerce taxation existing today.

 Increased Certainty: Common procedures for registration of taxpayers, refund of taxes,

uniform formats of tax return, common tax base, common system of classification of
goods or services along with timelines for every activity will lend greater certainty to
taxation system.

 Increased Digitalisation: GST is largely technology driven. The interface of the

taxpayer with the tax authorities will be through the common portal (GSTN). There will
be simplified and automated procedures for various processes such as registration,
returns, refunds, tax payments, etc. All processes, be it applying for registration, filing of
returns, payment of taxes, filing of refund claims etc., would be done online through
GSTN. The input tax credit will be verified online. Electronic matching of input tax
credit across India will make the process more transparent and accountable. This will
encourage a culture of compliance. This will also greatly reduce the human interface
between the taxpayer and the tax administration, leading to speedy decisions.

19
 1.6 Types of GST

Since GST subsumed indirect taxes of both central government (excise duty, service tax, custom
duty, etc.) and state governments (VAT, Luxury tax, etc.), both the governments now depend on
GST for their indirect tax revenue. Therefore, the GST rate is composed of two rates.  Intra-state
transactions will carry one of CGST and one of SGST (in case of state) or CGST and UTGST (in
case of union territory). Therefore, while making an intra-state sale (i.e., sale within the same
state), the CGST collected will go to the central government and the SGST collected will go the
respective state government in which sale is made. Similarly, SGST or UTGST are replaced with
IGST when intra-state transactions are involved.

Hence, you can say that there are four types of GST:
 Central Goods and Services Tax
 State Goods and Services Tax
 Integrated Goods and Services Tax
 Union Territory Goods and Services Tax

What is CGST?

CGST full form is Central Goods and Services Tax.

20
CGST refers to the Central GST tax that is levied by the Central Government of India on any
transaction of goods and services tax taking place within a state. It is one of the two taxes
charged on every intrastate (within one state) transaction, the other one being SGST (or UTGST
for Union Territories). CGST replaces all the existing Central taxes including Service Tax,
Central Excise Duty, CST, Customs Duty, SAD, etc. The rate of CGST is usually equal to the
SGST rate. Both taxes are charged on the base price of the product. See the example below to
understand it better.

e.g. – In the example above, when Suresh sales a product to Pradeep in the same state
(Rajasthan), he has to pay two taxes. CGST is for the central government while SGST is for the
state. The rate of CGST is 9%, same as SGST. After the application of CGST (9% of Rs 10,000),
the final cost of the product will become Rs 11,800.

As you can probably guess, all the taxes in all the conditions above are borne by the end
consumer in the final cost, not by the manufacturer or the dealer of the product or service. Since
GST is levied on consumption, the state where the product is originally manufactured is not
entitled to the tax collected. If the manufacturing state levies a tax, the same will be transferred
to the consuming state through the Central government.

What is SGST?

SGST full form is State Goods and Services Tax.

SGST (State GST) is one of the two taxes levied on every intrastate (within one state) transaction
of goods and services. The other one is CGST.  SGST is levied by the state where the goods are
being sold/purchased. It will replace all the existing state taxes including VAT, State Sales Tax,
Entertainment Tax, Luxury Tax, Entry Tax, State Cesses and Surcharges on any kind of
transaction involving goods and services. The State Government is the sole claimer of the
revenue earned under SGST. Let’s understand this with an example.

e.g. – Suresh from Rajasthan wants to sell some goods to Pradeep in Rajasthan. The product,
originally priced at Rs 10,000, will attract GST at 18% rate comprising of 9% CGST rate and 9%
SGST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000) which is fully claimed by
the Rajasthan State Government. The rate of the product after SGST will be Rs 10,900.

What is IGST?

IGST full form is Integrated Goods and Services Tax.

21
Integrated GST (IGST) is applicable on interstate (between two states) transactions of goods and
services, as well as on imports. This tax will be collected by the Central government and will
further be distributed among the respective states. IGST is charged when a product or service is
moved from one state to another. IGST is in place to ensure that a state has to deal only with the
Union government and not with every state separately to settle the interstate tax amounts. Let’s
try to understand IGST with an example.

e.g., – Ramesh is a manufacturer in Rajasthan who sold goods worth Rs 10,000 to Suresh in
Rajasthan. Since it is an interstate transaction, IGST will be applicable here. Let’s assume the
GST rate is 18% for the particular item. So, the IGST amount charged by the Central
Government will be Rs 1800 (18% of Rs 10,000), and the refined rate of the product will be Rs
11,800.

Now, GST is a consumption tax that means only the state where the goods are actually consumed
will get the tax benefits, irrespective of the manufacturing state.

What is UTGST (or UGST)?

UTGST full form is Union Territory Goods and Services Tax.

The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST
applicable on the goods and services supply that takes place in any of the five Union Territories
of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh,
Lakshadweep and Daman and Diu. This UTGST will be charged in addition to the Central GST
(CGST) explained above. For any transaction of goods/services within a Union Territory: CGST
+ UTGST

The reason why a separate GST was implemented for the Union Territories is that the common
State GST (SGST) cannot be applied in a Union Territory without legislature. Delhi and
Puducherry UTs already have their own legislatures, so SGST is applicable to them.

1.7 Difference between Different Types of GST Taxes

22
 TYPES OF CGST SGST IGST UTGST
DIFFERENCES
Applicable Intrastate Intrastate Inter-state Within one
transaction(Goods (Within one (Within one (between two Union Territory
and Services) state) state) states or one
state and one
UT) and imports
Collected by Central Govt. State Govt. Central Govt. UT Govt.

Tax Credit Use SGST IGST UTGST

Priority CGST IGST CGST IGST
IGST
SGST

1.8 GST objectives:

1.Ensuring that the cascading effect of tax on tax will be eliminated.

2.Improving the competitiveness of the original goods and services, thereby improving the
GDP rate too.

3.Ensuring the availability of input credit across the value chain.

4.Reducing the complications in tax administration and compliance.

5.Making a unified law involving all the tax bases, laws and administration procedures
across the country.

6.Decreasing the unhealthy competition among the states due to taxes and revenues.

7.Complete lack of adaptation mechanisms and trained staff.

8.In some cases, the double registration might annoy people. Also, these registrations result
in increase compliances and cost.

23
9.Unclear estimate of the exact impact of GST.

10.No clear mechanisms to control tax evasion.

 
 11.One Country – One Tax

12. based tax instead of Manufacturing

13.Uniform GST Registration, payment and Input tax Credit

14.To eliminate the cascading effect of Indirect taxes on single transaction

Subsume all indirect taxes at Centre and State Level under

15.Reduce tax evasion and corruption

16.Increase productivity

17.Increase Tax to GDP Ratio and revenue surplus

18.Increase Compliance

19.Reducing economic distortions

CHAPTER 2.RESEARCH METHODOLOGY OF GST IN

RESTAURANTS

2.1 OBJECTIVES.
2.2 SCOPE OF STUDY.
2.3 DATA COLLECTION.
2.4 LIMITATION OF STUDY.
2.5 HYPOTHESIS

2.1 OBJECTIVES:

To know about the GST rates.

To understand the advantages and disadvantages of GST.

To help to overcome the problems which may arise .

24
To understand how to identify frauds in restaurants and to overcome them.

To know the composition scheme of small business.

To know different rates applicable for different business.

To charge fixed rate of tax on foods and beverage.

2.2 SCOPE OF STUDY

There are many scope of study in gst in restaurants like in the field of accounts, in the field of
auditing, payment method, taxation, etc.

2.3 DATA COLLECTION

For collecting data I have been using Questionaire Method. Questionaire means a set of
questions have been made. I have made certain questions in which the customers have given
their opinion about Impact of GST in Restaurants. Their views on GST and its rates have been
given .As well as the question were set for the manager of restaurant though he has answer some
question and some question were not answered because of the secrecy of that restaurant.

2.4 LIMITATIONS OF THE STUDY

Their where not so limitation while studying this topic. But I feel their where some question
which were not answer. It was difficult to take some information from hotel staff about this
topic. While some customers where feeling awkward when I was asking about the topic. This are
some limitation that I found while studying this project.

2.5 HYPOTHESIS

After talking to people and seeing their views I have found that some people most often avoid
going to restaurants because of GST rates. They say restaurants charge high amount . So they
very rarely visit restaurants.Whereas some people still prefer going to restaurants. They are
affected by GST rates. This may be because their may have high income. Some people say they
are affected by GST rates whereas some say they are not affected by the rates. This show about
null hypothesis as well as alternative hypothesis.

25
 CHAPTER 3.GST REVIEW IN RESTAURANTS

3.1 WHAT IS RESTAURANT, WHAT THEY DEAL WITH.

3.2 HISTORY ABOUT RESTAURANTS

3.3 TYPES OF RESTAURANTS

3.4 GST ON HOTELS AND RESTAURANTS

3.5 GST IN RESTAURANT SERVICES

3.6 GST REGISTRATION FOR RESTAURANTS

3.7 OTHER IMPORTANT INFORMATION FOR GST RESTAURANTS

3.8 IMPACT OF GST ON ALCHOL & LIQUOR SECTOR, GST RATES ON

ALCHOL & LIQUOR

3.9 GST RATES ON FOOD GOODS

26
3.10 GST RATE TO BE LEVIED ON TAKEAWAY FOOD IN AC
RESTAURANTS

3.11 GST RATES ON EATING OUT

3.12 IMPACT ON RESTAURANT BUSINESS OWNERS

3.13 GST COMPOSITION SCHEME FOR RESTAURANTS

3.14 GST RATE STRUCTURE

3.15 GST RATE STRUCTURE FOR RESTAURANTS IN INDIA

3.16 EATING OUT GETS CHEAPER A NEW GST RATE FOR

RESTAURANTS

3.17 GST RATE CHART AS APPLICABLE TO RESTAURANTS

3.18 NATIONAL RESTAURANTS ASSOCIATION OF INDIA

3.19 CHECK RESTAURANT BILL BEFORE YOU PAY.

3.20 HOW MUCH GST IS APPLICABLE IF FOOD IS

PACKED/PARCELED FROM AC RESTAURANT?

3.21 IMPACTOF GST ONRESTAURANTGOERS

3.1 WHAT IS RESTAURANT,WHAT THEY DEAL WITH

A restaurant is a place where cooked food is sold to the public, and where people sit down to
eat it. It is also a place where people go to enjoy the time and to eat a meal.

Some restaurants are a chain, meaning that there are a lot of restaurants that have the same name
and serve the same food. McDonald's, Burger King, and Pizza Hut are examples of chain
restaurants that are all over the world. These restaurants serve fast food, that is, inexpensive
food, prepared and served quickly. At some, you do not have to even get out of the car to eat.
You can pay and get your order from a window. These places are called drive-throughs.

27
There are also chain restaurants that serve slightly more expensive food. They are called fast
casual restaurants. Applebee's and Perkins are examples of this type of chain restaurant.

Haute cuisine or 'fine dining' is found in a guide, such as the Michelin Guide, the most famous
restaurant guide in the world. Their 3-star rosettes are given only to restaurants with the highest
standards of cooking and service. Interestingly, the Guide gives more 3-stars to Tokyo and Kyoto
than to Paris, London and New York together. Traditionally, the restaurants of top hotels such as
the Hotel de Paris in Monte Carlo or the Hôtel Ritz Paris are the places recognized for fine
dining.

MENU:

A menu is a list of dishes to be served at a meal. Menus have been around in Europe since the
18th century. There is a special need for them in Chinese cuisine because of the wide range of
dishes on offer. Menus have been discovered from the Song Dynasty in China.[1] In the larger
cities of the time, the variety of cuisine from different regions led caterers to create a list for their
patrons.

In restaurants, the modern menu, with dishes in a set order of courses, was invented by the great
FrenchchefEscoffier.[2] Usually there are two types of menu at a good restaurant:[3]

 table d'hôte: a set menu at a fixed price (prix fixée).

 à la carte: a wider choice of items, each with its own price.

Lesser establishments might offer a chalkboard, with the advantage that items can be rubbed out
or added on at short notice. Fish restaurants in particular depend on daily catches being supplied
or bought in the early morning. They usually list fish freshly bought (as opposed to frozen)

In American restaurant management, "menu engineering" has become a branch of marketing.

Buffet

A buffet is a serve-yourself food system.

Food is placed in a public area where the diners choose what they want.

Buffets are now usual in many hotels for breakfast, and sometimes for other meals. They are also
common at social events, where people stand up to eat and talk.

Buffet restaurants usually offer all-you-can-eat food for a set price. Buffets usually have some
hot dishes. The term cold buffet (see Smörgåsbord) has been developed to describe buffets
lacking hot food. Hot or cold buffets usually involve dishware and utensils, but a finger buffet is

28
designed for small pieces taken by hand, such as cupcakes, slices of pizza, foods on cocktail
sticks, etc.

The essential feature of the various buffet formats is that the diners can see the food and
immediately select which dishes they wish to eat, and usually also can decide how much food
they take. Buffets are effective for serving large numbers of people at once, and are often seen in
institutional settings, such as business conventions Buffets grade into cafeterias when there is a
serving counter and the customer moves with a tray along a track.

FAST FOOD:

Fast food is the term for a kind of food that people eat from a restaurant, cafe or take-out where
food is prepared and served quickly.

The restaurants that sell fast food are called "fast food shops" or "fast food restaurants". Some of
the more common fast food restaurants are McDonald's, Wendy's, Burger King, Taco Bell, and
KFC.

3.2 HISTORY OF RESTAURANTS

Restaurants in Ancient Times 

The idea of selling food for profit existed during the earliest civilizations. It's no coincide the
growth of restaurants through history correlates with the growth of cities. The need for public
eateries was firmly established as far back as the Roman Empire and Ancient China. When
peasants and farmers brought their livestock and other goods to urban markets, often they
traveled for several days at a time and needed a place to eat and rest. This brought about the
earliest form of restaurants, the roadside inn.

Usually located in the middle of the countryside, inns served meals at a common table to
travelers. There were no menus or even options from which to choose. Every night was chef’s
choice.

Within city walls, where living conditions were cramped and many people did not have the
means to cook their own meals, vendors sold food from small carts or street kitchens, which is
still popular in many parts of the world. The meals they sold were usually precooked and
affordable, a forerunner to modern fast food. These early inns and taverns were more than just a
place to eat; they served an important social function by bringing people together.

29
Restaurants in the Middle Ages

In Europe through the Middle Ages and into the Renaissance, taverns and inns continued to be
the main place to buy a prepared meal. In Spain, these establishments were called bodegas,
which served small savory Spanish dishes called "tapas." In England, food such as sausage and
shepherd’s pie were popular; while, in France, stews and soups were offered. All of these early
restaurants served simple fare commonly found in peasant or merchant homes.

Following Columbus’s voyage to the Americas in 1492, global trade increased, introducing new
foods to Europe. Coffee, tea, and chocolate were soon being served in public houses alongside
beer, ale, and wine. By the 17th century, while full meals were still typically eaten at home,
moderately well-to-do people would hire a a caterer or take their meals in a private salon, rather
than in the main dining room of a public house.

The French Revolution and the Rise of Fine Dining

In France throughout the Middle Ages, guilds had monopolies on many aspects of prepared food.
For example, charcutiers were the guild who prepared cooked meats for sale. If you did not
belong to that particular guild, it was illegal to sell cooked meat in any form. In 1765, a man
named Boulanger added cooked lamb to a stew he sold in his shop near the Louvre. The caterer’s
guild sued him, but Boulanger won the case. Over the next 20 years leading up to the French
Revolution, more shops like Boulanger’s began opening in Paris.

When Marie Antoinette and Louis XVI went to the guillotine, the old ways of French society
went with them. The guilds were swept away and many chefs employed in aristocratic, even
royal, households found themselves unemployed. Many of these displaced workers opened their
own restaurants in Paris, bringing with them a new way of dining. Delicate china,

cutlery, and linen tablecloths, all trappings of aristocracy, were now available to a whole new
echelon of French citizens. Menus became more diverse, offering both prix fixe and a la carte
options.

Though public houses continued to exist, the rise of fine dining in France would soon spread
throughout Europe and into the New World.

Public gatherings over food and drink have long been a part of human society, as they offer a
place for people to come together for a meal and to socialize with others. Following the French
Revolution, fine dining restaurants expanded across Europe and to other parts of the world. In
the United States, the restaurant industry would become one of the leading employers during the
20th century.

WORLD’S FIRST RESTAURANT

30
The very first restaurant in the world was opened in Paris in 1765. A travern keeper, Monsieur
Boulanger, served a single dish – sheep’s feet simmered in a white sauce.

3.3 TYPES OF RESTAURANTS

1. Coffee Shop
2. Specialty Restaurants
3. Grill Room
4. Dinning Room
5. Discotheque
6. Night Club
7. Bars
8. Casual Dinning
9. Fast Food Restaurants
10. Cafeteria or Canteen
11. Dairy hotel
12. Food trucks
13. Food court.

COFFEE ROOM

 Open for 24X7.

 Menu should be for everyone (versatile menu).
 Quick service
 Needs very less staff.
 Cheaper rates for the dishes because the services are limited.
 They charge taxes as per unit of coffee mostly.

GRILL ROOM

 In grill room the serve 99% non veg.

 There would be a glass partition between the kitchen and the guest area.

31
 Generally opens at night.
 They charge tax on overall bill.

SPECIALTY RESTAURANT

 There is limited cuision.

 As per the cuision décor and theme is selected .
 Chiefs are specialised in some specific cuision.
 They charge 18% tax if you order ice-cream.

CONTINENTAL RESTAURANTS

 In the continental restaurants they provide silver services.

 As the name define they serve continental food.
 Clients will be less because they charge much for their service.
 They charge taxes on total bill

DINING ROOM

 This is a small restaurant.

 They provide American per plated service.
 They charge very less price from the guest.
 Provide very normal décor to the guest.
 They charge as per person.

CASUAL DINING

 They are dining restaurants, they provide casual dining.

 They mostly deal in unlimited food.
 They pricing is also low
 The taxes are included in price

DISCOTHEQUE

 This is the place where people can dance on the loud song.
 There will be dark light and wooden flooring.
 They can display bar also.

32
 NIGHT CLUB

 In the night club there are live performance.

 They provide silver services to the guest.
 They provide proper meal and limited menu
 They charge tax on drink you order the food is exempted
 Generally open in the night.The taxes are charge on ticket of club.

BARS

 A bar is a place where alcoholic drinks like beer, wine,liquor and cocktails for
consumption are available.
 The bars are very expensive place
 They can display alcohol bottles.
 Generally open at night.
 They charge tax on drink you order the food is exempted

CANTEEN

 Canteen is mostly seen in college and office.

 They act like non profiting making organisation(NPO).
 So there is no incurred tax in the price of canteen food.
 For example: R.A.D.A.V college

DAIRY HOTEL

 This type of hotel mostly deal with dairy product and various other product.

 The taxes are charged on the ordered of product.

FOOD TRUCK

 They serve food though the truck outlet

 The taxes are charge according to the bill amount.

3.4 GST on hotels and restaurants

33
Fooding is one of those business segments which will never go “out of fashion”.  According to
the National Restaurant Association of India’s 2013 India Food Service Report, the current size
of the Indian food service industry is ₹2,47,680 crore and is projected to grow to ₹4,08,040
crore by 2018 at the rate of 11%. Accordingly, this segment has been under the radar of taxation
authorities since the inception. Goods and Service Tax (GST) applicability on restaurants has
always been the talking point. Businesses are still trying to understand the changes required in
their current systems to accommodate the new compliance model.

Firstly, let us check out what are the components of a bill that is furnished to us by a
hotel/restaurant:

 Value Added Tax (VAT) – Erstwhile: This used to be the tax on the food items that you
had ordered.
 Service Tax (ST) – Erstwhile: This used to be the tax charged on the services provided
by the restaurant/hotel.
 Service Charge: This never was or is a tax. This is a self levied charge by the hotels.

After the implementation of the GST, no separate VAT and ST are now charged. Rather, a
consolidated rate is now charged. The rates were shuffled quite a few times. The GST Council,
in its 23rd meeting in Guwahati, had slashed the tax rates, made announcements regarding
availability of Input Tax Credit.

A summary of latest GST situation has been mentioned below:

Rates:

Type of GST Rate

Restaurants/Hotels/Lodges
All restaurants 5% no ITC
Restaurants within hotels (room 5% no ITC
tariff <7,500)
Restaurants within hotels (room 18% with ITC
tariff >7,500 )
Outdoor catering 18% with ITC
Hotels & Lodges with tariff below Exempt
Rs.  1000

 Liquor will attract state levies like VAT as it was kept outside the GST regime. Service
charge might still be levied by the respective restaurant/hotel.

34
Food parcels (or takeaways) will also attract 5% GST without ITC

Input Tax Credit:

The Ministry is of the opinion that since they did not pass on the ITC benefit to customers, the
hotels and restaurants will not be eligible for the benefit themselves.

Under the input tax credit, restaurants could claim an offset on the tax they pay on the final
products because of the tax they have already paid on input (essentially raw materials). It roughly
amounted to 3-4 per cent of the profit.

With the government not allowing the same, some restaurants may now hike prices of the
products on the menu itself in a bid to compensate for the losses they are suffering with the
lowering of GST rates and withdrawal of input tax credit. Some of such units like McDonalds,
Lifestyle have also been sent notices recently.

Impact on Restaurant Business Owners

Example:

On Materials Input:

Particulars Billing – Erstwhile Billing – GST (Rs.)

(Rs.)
Rice 1000 1000
Spices 300 300
Oil 200 200
TOTAL 1500 1500
VAT @ 5% 75 –
GST @ 5% – 75
     

Output Billing:

Particulars Billing – Erstwhile Billing – GST (Rs.)

(Rs.)

35
 Total Bill 5000 5000
VAT @ 14.5% 725 –
ST @ 6% 300 –
GST @ 5% – 250
Total Output Tax 1025 250
Liability
Input Credit – 75 –
– –
-VAT ITC (from
above)
-GST ITC
Final Output Tax 650 –
Liability – 300 –
– 250
-VAT
-ST
-GST

TAXES BEFORE AND AFTER GST IN RESTAURANTS

BEFORE AFTER

i. VAAT i. CGST
ii. SERVICE CHARGE ii. SGST
iii. SERVICE TAX
iv. FOOD TAXABLE CHARGE

3.5 GST IN RESTAURANT SERVICES

The GST regime of indirect taxation has subsumed most of the indirect taxes levied on the sale
and purchase of goods and services in India. The price of numerous commodities and services
have been affected due to the multiple indirect taxes imposed. When it comes to the restaurant
business, the rate of GST on restaurants has been a debatable issue. Under the pre-GST regime,
the bill of the restaurant included VAT, Services Tax and Service Charge. The particulars of a
restaurant bill before GST regime were as follows:

36
Price of food Item: The price stated in the Restaurant’s Menu card is the price on which the
different taxes were calculated.

VAT:  The Indirect tax levied on food items ordered.

Service Tax: The indirect tax levied on services provided by restaurants.

Service Charge: This is not an indirect tax, but a charge levied by restaurants over and above
Service Tax. The amount of Service Charge charged by the restaurant was not included in tax
collected by the government.

Rate of GST on Restaurant Bills

Type of Restaurants Tax

Rate
Restaurants (Stand Alone) 5%
without
Input The restaurant business is
Tax eligible to opt composition
Credit scheme under the GST law.
Restaurant being a part of a Hotel (where the 5% However, the restaurant is
declared tariff of the accommodation is not without required to follow the
exceeding Rupees 7500) Input prescribed composition GST
Tax rules.
Credit
Restaurant being a part of a Hotel (where the 18% The rate at which
declared tariff of the accommodation exceeds with restaurants are
Rupees 7500) Input required to pay GST
Tax is fixed at a
Credit concessional rate of
Regular Catering at say Company premises 5% 5% which is to be
without levied on the turnover
Input subject to the
Tax following restrictions.
Credit
Outdoor catering service 18%
with
Input
Tax
Credit  The Turnover of the
restaurant should not
exceed Rs 1.5 Crores
(Rupees 150 lakhs). However, this limit Rupees 1 Crore for special category States.
 The restaurant should not be engaged in any services other than restaurant subject to
certain exemptions.
 The restaurant can’t be engaged in the interstate supply of goods

37
  The restaurant can’t supply any items exempt under GST.
 The restaurant can’t supply goods through an e-commerce operator
 The restaurant can’t avail any ITC (Input Tax Credit)
 The restaurant can’t collect taxes from the customer

In addition to this the Restaurant opting for Composition Scheme is required to:

 mention the words “composition taxable person, not eligible to collect tax” on the bill of
supply.
 mention the words ‘composition taxable person’ on every notice or signboard at their
place of business or additional place of business.
 Regular Tax Payer V/s Composition dealer

Particulars Regular Scheme Composite Scheme

Registration Threshold limit – Threshold limit –
Rupees. 20 Lakhs Rupees. 150 lakhs (1.5
Cr)
Business No restriction on Restricted to Intra-State
Territory supply of goods or Supply
services
Switching to The Compliance Once the limit is crossed,
Composition procedure is high registration under regular
from Regular or provisions is compulsory
Vice versa
Input tax credit Eligible Not Eligible to avail ITC
(ITC)
Business through Supplier can supply Composition dealer
e-commerce goods through e- cannot supply goods
operator commerce operator through e-commerce
operator
Collection of Tax Eligible to collect Cannot collect tax from
tax from the the customer
customer
Tax invoice Can issue a tax Instead of Tax Invoice
invoice for outward can raise Bill of Supply
supply
GST returns Monthly returns Quarterly returns

3.6 GST Registration for Restaurants

38
The Goods and Services Tax (GST) is a landmark reform in India’s indirect tax regime
that entered the Indian economy on 1st July 2017. Most of the restaurants have already begun
carrying out with the impact studies to get their business to be able to adapt and accommodate its
business to GST tax regime. The existing system has a greater scope for manual intervention, but
GST aims to achieve a tectonic shift to a single digitized compliance set-up. Through the GST
Registration and Implementation, the taxpayers will pay one consolidated tax instead of the
plethora of taxes including State Value-Added Tax (VAT), Central Excise, and Service
Tax, Entry Tax or Octroi and a few other indirect taxes. Read in detail the impact of the GST
on the restaurant business here.

Owners of the restaurant business are always hassled with the several taxes right from the
purchase of raw materials to creating the product to ultimately selling the final product to the
consumer. Once your turnover is more than the fundamental exemption limit, then your
restaurants need a GST registration. Before moving forward with the procedure, you must know
the following points:

GST registration is state specific, so if your restaurants have outlets in different states, then
you need to have a separate registration for each state.
If you have outlets in the state itself, then you don’t need to take separate registration for each
outlet.

The Procedure of GST Registration for Restaurants

Let us look at the process of GST registration for your restaurant:

1. Documents Required for GST Registration of Restaurants

The documents required for GST registration are-

 Photo of the restaurant owner/proprietor

 Picture of Managing partner/designated partner in case of a partnership

Proof of Registration

 Partnership deed in case of partnership firm

 No registration certificate required in case of proprietorship

Evidence of Principle place of Restaurant

39
  If you own the property, then ownership document like electricity bill, tax
receipt/property tax receipt or registry documents of that place.
 If you are on rent, then copy of rent agreement/lease agreement with electricity bill in the
name of the owner.
 If you neither own the property nor on rent, then submit electricity bill along with the
copy of NOC (No Objection Certificate)

Bank Account Documents

 The other documents that are required related to bank bare-Scanned copy of bank
statement/bank passbook or scan copy of canceled cheque containing Name, bank
account no., MICR, IFSC and branch details including code.

2. GST Registration for Restaurant Business

The following steps have to be followed further once all the documents required for GST
registration has been procured.

 Apply for Registration: Firstly, you need to apply for GST registration in Form GST
REG – 01.

You would be then asked to upload the documents and sign the same with your digital signature.

 Verification of Documents: Once you apply, the department officer will verify your
application. If all the documents are found to be authentic, then he/she shall grant you the
registration certificate, or else your application might be rejected after giving reasons.
 Grant of Registration Certificate: The department shall grant you the registration
certificate then.

3. Application of GST Tax Rates on Restaurant Business 

The GST tax rate has been defined as per the different categories of the restaurant as explained at
the beginning of the article which is as follows:

 Category 1: Supply of food/drinks in the restaurant without AC and without the license
to serve liquor

GST Tax rate: 5% without input tax credit (ITC)

 Category 2: Supply of food/drinks in the restaurant having AC facility at any time during
the year

40
GST Tax rate: 5% with full Input Tax Credit (ITC)

 Category 3: Supply of food/drinks in an air-conditioned restaurant in 5 star or above-

rated hotels

GST Tax rate: 18% with full Input Tax Credit (ITC) above rated hotels

While these were the initial holdings, GST regulations went through a lot of amendments, and
you can find such changes here.

4. IGST, CGST, and SGST to be Charged by Restaurant Business

The components of Dual GST are:

a) CGST: Central Goods and Service Tax

b) SGST: State Goods and Service Tax
c) IGST: Integrated Goods and Service Tax

Since India is a federal country, both the Central and the state governments have responsibilities
to perform as per the Constitution.  Therefore, a dual GST will be keeping with the
Constitutional requirement of fiscal federalism. In the case of the restaurant business, the sales
are made within the state, and hence CGST and SGST shall be charged accordingly. There will
be a common e-return for CGST, SGST, IGST, and Additional Tax.

5. Filing for Returns Under the GST

Under GST, the restaurant business is treated as par with any other business. As per the GST
returns rules, three monthly returns are required to be filed. Here are the following three monthly
returns which are expected to be filed:

 Return no.1 – Outward Return (Sales Return): The first return on GST is the sales return
which is required to be filed by 10th of the following month.
 Return no.2 – Inward Return (Purchase Return): The second return is filed before 15th
of the following month.
 Return no.3 – Consolidated Return: Based upon the sales and purchase return, the
consolidated return is also filed by 20th of the following month.
 Further, apart from the above three monthly return, GST Annual Return has to be filed
by 31st December of next Financial year.

3.7 Other Important Information for the GST Registration 

Read the additional relevant information for the GST registration of restaurants below.

41
1. Invoices under GST

As per the GST rules, every invoice or receipt issued to the customer will have to be presented
before the government and based upon that tax returns will be prepared and filed.

2. Composition Scheme

Composition Scheme under GST is merely an extension Businesses dealing only in goods can
opt for composition scheme. However, Services providers have been kept outside the scope of
this scheme. The restaurant sector taxpayers are allowed to choose the plan.
This holds true if your annual turnover is below Rs 75 Lakhs. Restaurants with an annual
turnover less than Rs 75 lakhs will be able to avail the composition scheme under the goods
and services tax (GST) regime and pay a flat tax of 5% to the current scheme under VAT
law.

3. Input Tax Credit (ITC) for Restaurant Business

As per the recent ruling by the government, the Input Tax Credit for restaurants has been
withdrawn.

Input Tax Credit can be defined as the availing of credit for input taxes paid. Restaurants in
hotels that charge Rs 7500 per room are allowed are allowed to take input credit without any
restriction subject to specific guidelines. A restaurant owner would get credits for the taxes paid
on the raw materials purchased while computing the final indirect tax liability on the items that
are collected from the consumers.

The few more essential conditions that have to be kept in mind are:

 The stock invoice should not be more than 12 months old.

 The dealer should be registered.
 The stock is to be used in a taxable supply.
 Credit is allowable under GST law

4. Place of Supply for Restaurant Business

The location of supply is the registered place of business of the recipient.  The Place of Supply
under GST is an essential factor after which levy of SGST, CGST & IGST will be
determined as your place of supply defines whether the transaction will be counted as
intra-state(i.e., within the same state) or interstate (i.e., between two states) and then
accordingly the changeability of tax can be stated.

42
GST regulation underwent a lot of changes. In November 2017, while the entire country rejoiced
when the GST Council decided to reduce the GST rates from 18% to 5% for all restaurants along
with the Input Tax Credit withdrawal, there is a darker side of this provision that was very
casually ignored, know about them here.

Although the GST aims to simplify the entire tax structure, the registration and implementation
of the GST can be quite complex. Read this article to find out about the common GST mistakes
made by restaurant owners and the penalty involved with the mistakes.

Government Clears Confusion On GST Rates For Restaurants

In the wake of several consumers voicing their confusion on social media regarding GST rates
for restaurants and the relation of the same to VAT and service tax, the government has come out
with a clarification about GST rules for restaurants.

The food ordered at restaurants attracts two tax rates – 12% and 18% – depending on whether if
it is an AC restaurant or a non-AC restaurant, and whether the restaurant has the license to serve
alcohol or not.

The 12% and 18% GST rates include both CGST (Central GST) and SGST (State GST).

 For the GST tax rate of 12%, 6% is CGST and the remaining 6% is SGST.
 For the GST tax rate of 18%, 9% is CGST and the remaining 9% is SGST.

The 12% GST rate is for

 non-AC restaurants
 roadside eateries that don’t serve alcohol,
 local delivery restaurants.

The 18% GST rate is for

 the restaurants with full air-conditioning (both with or without alcohol),

 non-AC eateries that serve alcohol.

The CBEC has also clarified that “the actual GST incidence will be lesser due to increased
availability of input tax credit.”

Sandeep Sehgal, director-tax and regulatory at Ashok Maheshwary & Associates LLP, told
NDTV that many input credits that weren’t yet available, will now be available for utilising
against GST liability.

43
The tax department has also launched the app GST Rate Finder. Available on Google Play
platform for Android handsets, the app enables users to find the applicable GST rates on goods
and services. To know more about how this app can be downloaded and used.

Government Launches GST Rate Finder App:

The tax department has launched the app GST Rate Finder. Available on Google Play platform
for Android handsets, the app enables users to find the applicable GST rates on goods and
services.The rates can also be accessed on the tax department’s website.

Here is how you can download GST Rates Finder App

1. Open Google Play Store on your smartphone.

2. Go to the search tab and search for “GST Rate Finder”.
3. Select the app and press “Install” to download the app on your phone.

Here is how you can use the GST Rates Finder App

1. Open the GST Rates Finder app on your phone.

2. To find out the details about a product, write its name in the search box and click enter.
3. This will provide you with the all the details related to the product.

Tax rates:

Tax Rate - 5% for Restaurants (without bar license) with turnover less than 75 lacs and opting
for composition scheme. No Input Tax Credit Allowed

Tax Rate - 12% for Non-AC Restaurant (without bar license). Full Input Tax Credit Available.

Tax Rate - 18% for AC Restaurant (without bar license). Full Input Tax Credit Available.

Tax Rate - 18% for AC/Non AC Restaurant (with bar license). Full Input Tax Credit Available.

Tax Rate - 18% for Outdoor Catering. Full Input Tax Credit Available.

Tax Rate - 18% for Restaurants inside a five Star Hotel. Full Input Tax Credit Available.

44
Also businesses with turnover below Rs.20 lakh annually will be exempted from GST. For the
north-eastern states, the exemption threshold is Rs.10 lakh.

3.8 Impact of GST on Alcohol & Liquor Sector, GST Rates on Alcohol &
Liquor

Impact of GST on Alcohol & Liquor Sector, GST Rates on Alcohol & Liquor: Alcohol
sector is the second largest contributor of taxes to state government in India. Manufacture
of liquor meant for human consumption is subject to state excise duties and not central excise
duty. However, state excise duties will get replaced in GST. Andhra Pradesh and Telangana are
the highest alcohol consuming state in India. The population of these states is not only ahead in
consuming Indian made foreign liquor (IMFL) but also gets high of country liquor.

Indirect Impact

State government will continue to levy taxes on alcohol, but central government has kept
portable alcohol and alcohol for human consumption, out of GST purview. Alcohol
manufacturers are still claiming that they will see a hit on their margins due to increase tax rates
in input goods and services.

Price Variations

Prices of whiskey and wine are likely to be increased by 3% – 5%, while for beers they may
range between 12%-15%. Though liquor is exempted from GST, but major inputs required for
producing saleable alcohol like glass bottles, molasses, barley malt and denatured alcohol will be
taxed between 18%-28%. Hence manufacturers will end up paying taxes on input services and
goods without obtaining any liability on sales. However, if the prices increases, the customers
will decrease which might affect the states’ revenue in horizon.

Marginal Relief

Only sigh of relief is in relaxation of GST on second-hand liquor bottles. It is because, firm relies
on second hand bottle as they have life span of seven time uses and cost only 33.33% of new
bottle.

Product Portfolio

It is also expected that companies will see their margins in dip on their cheap brands that operate
on lower margins than the mid-market and premium brands due to higher input taxes; this will
get stabilized once cost is passed to the end consumer which may take 6 months period.

45
Policies Pressure

industry has already taken a lot of hits due to demonetization and the highway ban. State
government has also lost their ration of revenue collections. In that This case if State
Government does not come up with appropriate directions, then companies will have to and
bound to shoot their prices

Expensive for end consumers

Manufacturers of alcoholic beverages for human consumption obtain the raw materials (Extra
Neutral Alcohol (ENA)/Grain Neutral Spirit (GNS) / Concentrate of Alcoholic Beverage) either
through captive manufacture or by way of purchase from third parties in India or they import it
from other countries. As the finished product will be kept outside GST regime, it will not only
have negative impact on the state revenues but also makes the end product expensive and thus,
drive the consumers to find ways and means to resort to spurious products

Second-hand Bottle Boon

Some of the alcohol – beverages manufacturers use their own restricted patented bottles, which
may be used 5-7 times by the same manufacturer.  Presently, many States impose a lesser VAT
rate with some states like imposing the standard VAT rate on glass bottles taxable against the
VAT on the finished product sold within the state. The used glass bottles which are purchased by
brewers / spirits manufacturers from used bottle dealers are again taxed at the lower/ standard
VAT.

In GST, each re-use / re-supply is likely to attract GST @ 18% with no possibility of credit as
alcohol is excluded from GST base. The effective GST cost on every bottle will come to around
70% of the purchase price of a new bottle.  This too will increase the cost as levying VAT on
used bottles at the full purchase price leads to dual taxation, since the bottles have already been
exposed to VAT at the time of first purchase by the brewery or manufacturer from the bottle
manufacturer.

3.9 GST rates on food goods

HSHSN Description of goods and GST

CODE servicesoods & Services RATES=
2201 Water [other than aerated, mineral, NIL
purified, distilled, medicinal, ionic,
battery, de-mineralized and water
sold in sealed container]
46
 2201 Non-alcoholic Toddy, Neera NIL
2202 90 Tender coconut water put up in NIL
90 unit container and bearing a
registered brand name
2201 90 Ice and snow 12%
10
2201 90 Soya milk drinks 12%
10
2202 90 Fruit pulp or fruit juice based 12%
30 drinks
2202 90 Tender coconut water put up in 12%
90 unit container and bearing a
registered brand name
2202 90 Beverages containing milk 12%
30
2201 Waters, including natural or 18%
artificial mineral waters and
aerated waters, not containing
added sugar or other sweetening
matter nor flavoured.
2207 Ethyl alcohol and other spirits, 18%
denatured, of any strength
2209 Vinegar and substitutes for vinegar 18%
obtained from acetic acid
2202 90 Other non-alcoholic beverages 28%
90
2202 10 Aerated waters, containing added 28%
sugar or other sweetening matter
or flavoured
  Beer, wine, rum, brandy, whisky, 28%
vinegar etc. fall under HSN code
chapter 22 of GST commodity
tariff schedule.  The details about
GST rate changes on sale of Beer,
wine, rum, brandy, whisky,
vinegar etc.

3.10 GST Rate to be levied on Takeaway Food in AC Restaurants

The Goods and Services Tax (GST) was a landmark reform in India’s indirect tax regime that
entered the Indian economy on 1st July 2017.  The GST aimed to achieve a tectonic shift to a
singular digitized compliance set-up. However, since its inception, it did bring in with itself a lot
of confusions, queries, and scepticism from the restaurant industry. The Government came up
with another GST update where it stated that a uniform GST  rate of 18 percent will be

47
charged on takeaways as well as food served from a Non-AC area of a restaurant if any of
its parts has a facility of air conditioning. Read more about the impact of the GST Bill on the
restaurants here.

18% GST Rate on Takeaway Food

Earlier the new GST regime, which was enacted from 1 July provided for levy of 12 percent on
food bill in non-AC restaurants.  The Central Board of Excise and Customs (CBEC) through an
FAQ came up with a clarification on the GST rates. It stated that in a case of a restaurant-cum-
bars where the first floor is air-conditioned which is used for serving food and liquor while the
Non-AC ground floor which serves only food, the GST tax rate charged will be 18%. The
CBEC further said that if any part of the establishment has air conditioning facility, then
the rate will be charged at 18 % for all supplies from the restaurant irrespective of whether
the supply is made from the ground floor or first floor. The CBEC further notified that tax
has to be charged at 18% on all supplies of food made from the takeaway counters on such
kind of restaurants.

Impact of the GST Update on the Restaurant Business

The revision in the tax structure will have tremendous impacts on the restaurant business. To
minimize the loss of their business, the restaurants that have a Non-AC service area in their AC
restaurant should come up with different remedies.

 This revision in the tax rate may lead to severe loss of business for the takeaway as
customers won’t be willing to pay the tax rate of 18% as they are not taking any service.
 The customers will have to pay a tax rate of 18% when they are taking a Non-AC service
which was initially 12%. This will slow down and reduce the business for the
restaurants that serve food from a Non-AC area of a restaurant if any of its parts has a
facility of air conditioning.

 The restaurants may have to lower their prices by at least a recognizable percentage
and at the same time promote it so that they don’t lose out on their valuable customers.

Giving out complimentary to the customers can also help the restaurants in retaining their
customers. Using these remedies will minimize these drastic impacts if not completely neutralize
them.

Besides, such restaurants are also not eligible for the composition scheme as they are engaged in
supplying liquor and the composition scheme under GST can only apply to those restaurants that
deal in goods.

Update: According to the recent GST update by the government, the GST rates have been
slashed to 5% for both AC as well as Non-AC restaurants.

48
Restaurant Bill

As an end consumer, we hardly pay attention to our food bill in these restaurants and most of us
are not even aware of the components included in it.

If you revisit your food bill from the pre-GST fine-dine experience, you’ll find Service Tax,
Service Charge, VAT being added over and above the food value.

First, let us understand the components of the bill:

 VAT: This is the tax charged on the food portion of your bill.
 Service tax: This is the tax charged on the services provided by the restaurant. [To avoid
unnecessary complications government had already bifurcated the service portion and
food portion and charge taxes accordingly.]
 Service Charge: This is a charge applied by the restaurants and not by the government.
THIS IS NOT A TAX. It should not be confused with service tax as this is an income to
the hotels. Service tax is not an income and merely a tax collected from you and
submitted to the government.

However, the rates under GST are vastly different than what you would find before the tax
policy change. Let us look at these changed rates below.

3.11 GST Rates on Eating Out

Type of Restaurants GST Rate

All restaurants 5% no ITC
Restaurants within hotels (room 5% no ITC
tariff <7,500- 5% without ITC
Restaurants within hotels (room 18% with ITC
tariff >7,500 ) still 18% with ITC
Outdoor catering 18% with ITC

In the GST regime, the Service Tax and VAT amount will be subsumed into one single rate, but
you may still find service charge doing rounds on your food bill.

Below we have provided a high-level comparison of how your food bill will look pre and post-
GST

49
So, at a standard rate of 18% under GST, a consumer will save around Rs. 55 on a transaction
value of Rs. 2,200. Here, we have assumed that VAT is applicable at 100% of the value without
any abatement. Furthermore, if we see the effective rate of tax under VAT regime, it sums up to
around 20.5% which will come down to 18%.

3.12 Impact on Restaurant Business Owners

PARTICULAR BILLING UNDER BILLING UNDER GST

CURRENT REGIME REGIME

50
 RICE 30 30
DAL 20 20
SWEAT 50 50
TOTAL 100 100

TAXES 30 9

PROFIT 70 91

Due to the introduction of GST the restaurant owner is earning good amount of profit. This is the
impact of GST to the restaurant owner.

Thus we can fairly conclude that GST will bring reasons to rejoice for both consumers and
restaurant owners under the new regime and we will have more reason to explore the new food
joints in our neighbourhood and pamper our taste buds.

Non-air conditioned establishments: The establishments that don’t serve alcohol will charge
GST at 12% (Central GST at 6% and State GST at 6%) while the ones that do serve alcohol will
charge 18% GST (9% CGST and 9% SGST).

Air conditioned, partly air-conditioned, five-star: These establishments will charge GST at

18% (9% CGST and 9% SGST) regardless of the alcohol availability for patrons. So this brings
the tax on restaurant outings down from 20.5% to 18%.

3.13 GST Composition Scheme for Restaurants

The GST Composition scheme gives a simple and easy technique for organizations to keep up
with GST Compliance. Small business enrolled under this scheme can pay tax at a fixed
percentage of their turnover each quarter and file quarterly GST Returns. In this manner, small
businesses enlisted under this scheme won’t be required to file month to month GST returns or

51
remit monthly GST payments. In this article, we will discuss the applicability of composition
scheme for restaurants.

Registration for Restaurants under Composition Scheme

 Restaurants having a yearly turnover of up to Rs. 75 Lakhs are eligible for registration
under the Composition Scheme
 Restaurants falling in the states of Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and having a yearly turnover of
up to Rs. 50 Lakhs can be registered under this scheme.

Conditions for registration under Composition Scheme

The following conditions must be satisfied by the restaurants for registration in the composition
scheme:

 The Restaurant should not be temporary or seasonal.

 For the purchases of goods and services from an unregistered supplier, GST on reverse
charge basis must have been paid by the restaurant.
 No inter-state outward supplies of Goods can be made by the restaurant.
 Supply of goods cannot be made through an electronic commerce operator who is
required to collect tax at source.
 Restaurants cannot be involved in the manufacture of Ice Cream, Edible Ice, Pan Masala,
Tobacco and its substitutes.

Payments for Restaurants under Composition Scheme

Restaurants registered under the Composition Scheme will have to pay the taxes at the rate of 5%
of yearly turnover which is divided into 2.5% as SGST and 2.5% as CGST. Yearly turnover of
the restaurant will be calculated based on their turnover and will include value of all taxable
supplies exempt supplies and exports made by the individual with the same Permanent Account
Number (PAN), but exclude inward suppliers under reverse charge and Central, State/ Union
Territory and Integrated taxes and cess.

Invoicing for Restaurants under Composition Scheme

Restaurants registered under the composition scheme will have to issue a bill of supply as they
are not allowed to issue a GST Tax invoice or collect GST. In the Bill of supply, rate per
quantity and taxable value is specified.

Moreover, restaurants should mention the words “composition taxable person, not eligible to
collect tax on supplies” on top of their bill issued.

Return Filing for Restaurants under Composition Scheme

52
Restaurants registered under the composition scheme needs to file quarterly returns through
FORM GSTR-4 on GSTN common portal by 18th of the quarter month. For example, returns
made during the month of October 2017-December 2017 is required to be filed by 18th January
2018.

NOTE: Restaurants opting for Composition Scheme under GST will not be eligible to take input
tax credit on input supplies. Therefore, with all the points explained above it is recommended for
the restaurant owners to conduct a deep analysis for their business before switching or opting for
the Composition Scheme under the GST.

Restaurants Under GST Composition Scheme

Updated on Oct 03, 2018 - 11:11:42 AM

GST rates for restaurants have been a matter of a lot of discussions and the rates on the same
have undergone a series of change at 28th GST Council meeting.

In this write up we will try and give a picture of the tax options available for restaurants under
GST:

1. GST Rates on Restaurant Bills

Type of Restaurants GST Rate

Stand Alone Restaurants 5% no ITC
Restaurants forming part of Hotels where the declared tariff of the accommodation
5% no ITC
does not exceed Rs 7500
Restaurants forming part of Hotels where the declared tariff of the accommodation 18% with
exceeds Rs 7500 ITC
Regular Catering at say Company premises 5% no ITC
18% with
Event Catering Outdoor catering
ITC

2. GST Composition Scheme Rules

Restaurants are required to pay GST at a concessional rate of 5% on the turnover under
Composition Scheme subject to following restrictions

 Turnover not to exceed Rs 1.5 Crores (Rs 1 Crore in case of special category States)

53
  Should not be engaged in any services other than restaurant (special exception carved out
for services like interest and exempt services)

 Restaurant cannot make inter-state outward supply of goods

 Cannot supply any items exempt under GST.

 They cannot supply goods through an e-commerce operator

 Restaurants cannot avail any input tax credit

 They cannot collect taxes from the customer

3. Regular Tax Payer V/s Composition dealer

Particulars Regular Tax Payer Composite Tax Payer

Registration Threshold limit – Rs. Threshold limit – Rs. 1.5 Cr
20L
Territory of Business No restriction on supply Limited to Intra-State Supply
Switch from Regular to Compliance procedure is Once crosses the limit, compulsory
Composition or Vice versa high registration under regular provisions
Input tax credit Depends on the category Not entitled to avail the credit
Business through e- Can supply goods Cannot supply goods through e-
commerce through e-commerce commerce
Tax collection Allowed to collect tax Cannot collect tax from the buyer
from the buyer
Tax invoice Can raise a tax invoice Can raise Bill of Supply instead of
for outward supply Tax invoice for outward supply
GST returns Monthly – GSTR 1 & Quarterly – Only GSTR 4
GSTR 3B

4. Identify Restaurant under Composition Scheme

 Restaurants opting for the composition scheme must mention the words “composition
taxable person, not eligible to collect tax on supplies” on the top of the bill of supply.
 They must also mention the words ‘composition taxable person’ on every notice or
signboard prominently displayed at their place of business.

54
5. Benefits to Restaurant under GST

 Compliance requirement under one law instead of multiple laws

Excise on the manufacture of pastries, service tax on accommodation and restaurant, VAT on
restaurant, luxury tax on renting of rooms and entertainment tax on ticket events.  

 Credit of GST paid on procurements

Entry Tax paid on machinery, CST on interstate purchases and excise paid on procurement of
furniture and packaged foods were not allowed as credit to restaurant owners. With GST, all the
taxes paid on such procurements are allowed as credit unless they are required to pay taxes at a
concessional rate

 Option to pay taxes under the composition scheme at 5% if the turnover does not exceed
Rs 1.5 Crores
 Concessional Rate of 5% (without input tax credit)
 Credit on food or outdoor catering if used in a similar line of business

The CBEC also explained the tax rates under the composition scheme:
 

GST rate of Composition

Traders Manufacturers Restaurants

1% 2% 5%

 In service sector, Composition Scheme is available only for one sector - restaurants
 The composition scheme is not available for manufacturers of tobacco and manufactured
tobacco substitutes, pan-masala and ice-cream, and other edible ice, whether or not
containing cocoa
 The dealers who opt for composition scheme have to file only one quarterly return with
details of total turnover
 Invoice with details are not necessary and the bill of supply will suffice
 Small taxpayers are not required to give HSN code in their returns
 However, in this option, no input tax credit can be taken or passed on
 With online registration, return, payment, refund and other processes, delays and
discretion would be reduced
 Reduced compliance burden
 Special dispensation for job work to help job workers in the GST regime

55
 3.14 GST Rate Structure

 Goods and Services Tax (GST) Bill has been stirring storms and spewing debates over its
impact on restaurants and its customers. As per the final proposed GST Bill, a four-tier
GST rate structure- 5%, 12%, 18% and 28% has been set, where tax is levied at multiple
rates ranging from 0 percent to 28 percent. Essential items including food, which
constitutes about half of the consumer inflation basket as well as major foodgrains have
been exempted from the GST and will be taxed at zero rates. As per the recent update
from GST Council, the new GST Rate in India is fixed to be 5% for all Restaurants. Read
in detail all you need to know about the GST Bill and how it impacts the restaurant
business here.

 While it was earlier said that the impact of GST seems to be neutral on the restaurant
industry, with the tax at consumer end coming down from 30% to the standard rate of 5%
and the withdrawal of Input Tax Credits(ITC), it seems to affect the restaurant industry in
a negative manner. Although dining out gets cheaper, but for restaurants, managing costs
is becoming a herculean task.
 Under the new GST rate structure announced by the Finance Minister Arun Jaitley,
restaurants will be taxed on the basis of their turnover and whether or not the
establishment is AC or Non-AC. Read how the new GST rates affect the restaurant
business here. 

 Impact of GST Rate Structure on Restaurant Food Costs
 The overall food cost of the restaurant kitchen has decreased under the new GST regime.
Edible oil, tea, coffee and spices which were taxed at 3%-9% have dropped to 5% while
goods taxed at 9-15 percent are now taxed at 12%. Items that presently fall in the 15-21
percent range have dropped to 18%, thus affecting the overall food cost.
 The GST rate structure is lower than the previous tax rates with items of mass
consumption such as foodgrains taxed at 5% as opposed to the previous 6%, while
processed food is charged at 12% as opposed to the previous 15%. Alcohol and aerated
drinks that come under the Luxury category will also attract an additional cess along with
the tax of 28%.
 Alcohol falls under the State Tax and Excise, and is hence outside of the GST.
However, the impact of the GST may still cause the price of alcohol to shoot up. 
 Food cost, on an average, represents 25-40 percent of the restaurant cost which is
followed by labor cost that represents about 25-35 percent.  There is no other cost in the
restaurant cost structure as high as the food cost; hence, restaurants should aim at keeping
their food cost between 28-35 percent of their total operating budget. Hence, a reduction
the food cost is likely to benefit the hospitality industry.

56
Impact of GST Rate Structure on Restaurant Bills

The GST rate structure spells good news for the restaurants as the multiple taxes have
been removed, resulting in reduced bills. Cheaper bills are sure to attract customers and would
result in an overall increase in business.

“The restaurant industry has been burdened with high and multiple taxations. NRAI has been
advocating for reduction/simplification of the same. We welcome the Centre’s move

for the introduction of this much-awaited reform.” – Riyaaz Amlani, president, National
Restaurant Association of India.

 a uniform 5% tax Structure on Both ac & NON-AC Restaurants will definitely help in

rationalising the tariffs across restaurants in India. but the restaurant sector seems
discontent with the withdrawal of Input Tax Credit(ITC) As the costs will go up.

3.15 GST Rate Structure for Restaurants in India

HOTEL TYPE TAX RATE

One Star(NON A/C) Overall 12%(6% CGST,6% SGST)
Two Star(NON A/C) Overall 12%(6% CGST,6% SGST)
Three Star(A/C) Overall 18%(9% CGST,9% SGST)
Four Star(A/C) Overall 18%(9% CGST,9% SGST)
Five Star Overall 28%(14% CGST,14% SGST)
If you order ice-cream Overall 18%(9% CGST,9%SGST) only in five
star hotel
SMALL RESTAURANT-5%

3.16 EATING OUT GETS CHEAPER A NEW GST RATE FOR

RESTAURANTS

Eating out has become marginally cheaper from as consumers will now have to pay less tax on
food served in restaurants.

Last week, the GST Council cut GST rates for all restaurants, except the ones located within
hotels with room tariffs of Rs7,500 and above and outdoor catering, to 5%. Earlier, the levy was
18% for air-conditioned eateries and those with liquor licences and 12% for non-air-conditioned
restaurants.

However, food bills may not come down in line with the expectations of consumers as the
government has withdrawn input tax credit for restaurants where 5% GST is applicable.

57
Under the input tax credit, restaurants could claim an offset on the tax they pay on inputs
(essentially raw materials) against the tax on the final products.

According to estimates by Federation of Hotels and Restaurants Association of India (FHRAI),

input tax credit accounts for 3-4% of profit of a restaurant.

With the input tax credit out of the system, restaurants are now likely to increase the menu prices
to adjust the tax they would pay for buying raw materials.

However, consumers are still likely to benefit as they had to pay 18% GST earlier. That means
for a menu price of Rs100, a consumer had to pay Rs118 after tax is added.

Under the new GST slab, assuming a restaurant decides to pass on the input cost burden to the
consumers, the menu price would go up by an estimated 10% making it Rs110. With 5% GST,
consumer will now have to pay Rs115.50 which is still cheaper.

“The new GST rate is definitely beneficial for the consumer. And there is the feel-good factor of
lower GST. So, the propensity of eating out will be higher," said Rahul Singh, vice-president,
National Restaurant Association of India. Singh is also founder and CEO of restaurant chain The
Beer Cafe.

Rating agency Icra estimated that dining out should get 7-13% cheaper for consumers.
According to Icra, restaurants used to get input credit on products like unpackaged grains,
poultry, seafood and vegetables which are exempt from GST.

In a briefing after the GST Council meeting on 10 November, finance minister Arun Jaitley said
the council had decided to do away with the input tax credit as benefits are not being passed on
to consumers. “Since they did not pass on the ITC (input tax credit) benefit to customers, they
will not be eligible for the benefit themselves," Jaitley said.

On the other hand, the abolition of input tax credit may lead to restaurants dealing with vendors
that are not GST registered.

“The industry is already struggling. And this makes things difficult. Doing business with vendors
without bills or invoices can’t be ruled out. With input tax credit gone, there is no incentive of
buying from GST-registered vendors. Now it makes more sense to buy in cash without bills. This
will at least help saving taxes on inputs," said a restaurant owner asking not to be named.

The food services market in India is projected to grow to Rs4.98 trillion by 2021, expanding at
an annual average rate of 10%, from Rs3.09 trillion in 2016, according to the NRAI-Technopak
report.

However, footfalls at restaurants have dropped an estimated 30% after imposition of 18% GST
on 1 July.

58
This means consumers would have to shell out more or less depending on whether they are
visiting a restaurant with air conditioner or just a regular non-ac food joint. The service tax rates
at restaurants in 5-star, 7-star hotels will be much higher at 28 per cent.

Similarly, the GST Council decided on different tax rates depending on the type of hotels. The
GST on hotels and lodges which charge between Rs  1,000 and Rs 2,500 will be 12 per cent.
While, the GST on hotel rooms in the price range of Rs 2,500-Rs 5,000 will be 18 %. For lodges
and hotels cheaper than Rs 1,000, the GST is set at 5 %.

Here is a lowdown on the new rates:

 Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 per cent.
 Non-ac restaurants will have a 12% tax rate.
 AC restaurants will have to shell out 18% tax.
 Also five-star restaurants will have to submit a luxury tax of 28 percent.
 Hotels, lodges with tariffs less than Rs 1,000 will be taxed at 5%.
 Hotel lodges with tariffs between Rs 1,000- Rs 2,500 will be charged 12% tax
 Hotel lodges with tariffs between Rs 2,500- Rs 5,000 will be charged 18% tax.

3.17 GST Rate Chart as applicable to Restaurants

Particulars Post amendment Before

i.e.,                From amendment i.e.,
15th November, Before 15th
2017 November, 2017
GST Input GST Input
Rates Tax Rates Tax
Credit Credit
Non-air Don’t 5% Not 12% Available
conditioned serve Available
establishments alcohol
that Serve 18%
alcohol
Air-conditioned restaurants 18%
(regardless of alcohol
availability)  
Takeaway 5% Not
Available
Restaurants Declared 5% Not
within hotels Room Available
with tariff <
7,500/-
Declared 18% Available
Room

59
 tariff >
7,500/-
Outdoor catering 18% Available

Notes:

♠ GST rate will not depend now onwards whether restaurant is Air conditioned or Non-Air
conditioned, serving alcohol or not.

♠ Post amendment, restaurants would be divided into 3 categories

(i) Stand-alone restaurants

(ii) Restaurants in hotel premises

(iii) Outdoor catering

3.18 NATIONAL RESTAURANTS ASSOCIATION OF INDIA

According to the National Restaurant Association of India’s 2013 India Food Service Report, the
current size of the Indian food service industry is ₹2,47,680 crore and is projected to grow to
₹4,08,040 crore by 2018 at the rate of 11%. This growth is further fueled by the growth of the
great Indian middle class. Rapid urbanization, growing awareness of western lifestyles, more
women joining the workforce, and higher disposable income were some of the factors that
contributed to the growth of the restaurant industry. As a result, we find ourselves waiting in
queues in most of the restaurants during the weekend.

60
Indian Food Service Industry

As you can see above, the numbers look promising for the restaurant and food industry in the
days following GST.

Understanding Your Restaurant Bill

As an end consumer, we hardly pay attention to our food bill in these restaurants and most of us
are not even aware of the components included in it.

If you revisit your food bill from the pre-GST fine-dine experience, you’ll find Service Tax,
Service Charge, VAT being added over and above the food value.

First, let us understand the components of the bill:

 VAT: This is the tax charged on the food portion of your bill.
 Service tax: This is the tax charged on the services provided by the restaurant. [To avoid
unnecessary complications government had already bifurcated the service portion and
food portion and charge taxes accordingly.]
 Service Charge: This is a charge applied by the restaurants and not by the government.
THIS IS NOT A TAX. It should not be confused with service tax as this is an income to
the hotels. Service tax is not an income and merely a tax collected from you and
submitted to the government.

However, the rates under GST are vastly different than what you would find before the tax
policy change. Let us look at these changed rates below.

3.19 Check Restaurant Bill Before You Pay.

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Next time you dine at a restaurant, do check your bill to see if the proper GST or goods or
services tax rate has been levied. The tax department has come out with clarifications on rates of
GST for restaurants. The clarification comes in the wake of many people flooding the social
media, seeking clarity over the new tax regime. The government has also launched an app, called
GST Rate Finder, to help people find out the GST rate on the particular goods/services. GST,
which came into force from July 1, replaced a multitude of central and state taxes including
VAT, service tax and cesses.

Food served at restaurants attract tax at two rates under GST - 12 per cent and 18 per cent -
depending on whether it is an AC restaurant or whether the restaurant has the licence to serve
alcohol. 

It should also be noted that the GST rates of 12 per cent and 18 per cent include both CGST
(Central GST) and SGST (State GST). For the GST tax rate of 12 per cent, it is split at 6 per cent
Central GST (which goes to the Centre's kitty) and 6 per cent State GST (which goes to the

state's kitty). So happens for the 18 per cent GST rate, which is split at 9 per cent Central GST
and 9 per cent State GST.
 

The tax department has also clarified that "the actual GST incidence will be lesser due to
increased availability of input tax credit." Many input credits which were hitherto not available
would be available now to be utilised against GST liability, says Sandeep Sehgal, director-tax
and regulatory at Ashok Maheshwary & Associates LLP.

It has also been clarified that restaurants up to an aggregate turnover of Rs. 75 lakh that opt for
the composition scheme will charge GST at the rate of 5 per cent.

The lower limit of Rs. 50 lakh is applicable for the states of Assam, Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh, the tax
department said. (Restaurants with annual turnover up to Rs. 75 lakh can opt for the composition
scheme, which enables them to pay tax at a flat rate without input credits.)

Non-AC restaurants serving no alcohol

The tax department said restaurants without air-conditioning in any part thereof and not serving
liquor will pay GST at the rate of 12 per cent.

AC restaurants or those serving alcohol

Restaurants with partial or full air-conditioning or those serving liquor will attract GST rate of 18
per cent.

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Pre-packed food

The rate of tax on parcel of pre-packed and pre-cooked namkin sold from restaurants will attract
tax at 12 per cent. Also, in case of food parcel cooked as per order, GST rates will be applicable
according to service of such food in the restaurant, it noted.

The tax department has also launched the app GST Rate Finder. Available on Google Play
platform for Android handsets, the app enables users to find the applicable GST rates on goods
and services. The rates can also be accessed on the tax department's website.

1. Taxman clarifies on rates of GST for restaurants

2. Food served at restaurants attract tax at two rates of 12%, 18% under GST
3. GST rates for restaurants include both CGST and SGST

3.20 HOW MUCH GST IS APPLICABLE IF FOOD IS PACKED/

PARCELED FROM AC RESTAURANT?

 As food is packed from an AC restaurant, GST will be applicable @18% on such foods. It
doesn’t matter if the food is served at the restaurant or parceled.

What is the rate of GST on service charge component?

Whatever GST rate is applicable on the restaurant, the same rate shall be applicable to the
service charge component and no different GST rate shall be applicable. For example:

 If the restaurant is neither Air conditioned nor liquor is served, then GST rate is 12%.
 If either liquor is served or AC facility is there, then GST rate is 18%.
 If the restaurant is in the five-star hotel, then GST rate is 28%.

GST on service charge calculation with example

Mr A went to a restaurant in Delhi and ordered food along with liquor. After having his dinner,
he asked for a bill. His bill was as under:

 Food Rs.500
63
  Liquor Rs.1000
 Service Charge @10% Rs.150.

Kindly advice how GST shall be calculated in above case?

A. GST in India is not applicable on alcohol made for human consumption and therefore,
GST shall not be calculated rather VAT shall be calculated on it. Hence, the GST of 18%
shall be charged on Food (Rs.500) and service charge of Rs.150

3.21 Impact of GST on restaurant goers

The one and only point of interest for most food lovers who love to dine out will be – the GST
rates on restaurants. Let us try to understand how the taxes on a food bill look like in the GST
regime, compared to the previous regime.

Previous regime

In the previous regime, dining at a standard AC restaurant was considered to be a supply of both
goods and services – which is why VAT as well as Service Tax was applicable. On top of the
same, one would find the various cesses, such as Krishi Kalyan Cess and Swachch Bharat Cess
being applied on the cost.

In short, the taxes applicable were:

 VAT, depending on state=12.5% to 14.5%

 Service Tax, considering 60% abatement on 15% standard rate = 6.0%
 Krishi Kalyan Cess = 0.2%
 Swachch Bharat Cess = 0.2%
 Total Effective Tax = 18.9% to 20.9%

Thus, the previous regime of multiple taxes had a composite levy of both Service Tax and VAT
on food and beverages served in hotels which made up to nearly 21% of tax to be shelled out
from the pocket of the end consumers.

GST regime

The major impact of GST on hotels and restaurants in the GST regime is, that supply of food and
beverages will be treated as a supply of services. Under GST, Service Tax, VAT and all other
indirect taxes which were being charged earlier, will be subsumed.

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As per the GST Council, the following are the GST rates on restaurants –

 Non – AC Restaurants – 12%

 AC Restaurants – 18%
 5 Star Hotels & Restaurants – 28%
 Small Restaurants & Eateries – 5% (Under Composition Scheme) paid by hotel on their
turnover, wherein there is a probability of this burden being passed on the consumer.

However, as discussed earlier, alcohol will be out of the purview of GST, and thus liquor will
attract VAT, as imposed by the respective states. So, if one orders alcoholic beverages and food,
one pays GST on food and VAT on alcoholic beverages.

Previous vs. GST regime comparison

A quick GST calculation for restaurants will reveal a clearer picture. If we consider non-AC
restaurants, we can comfortably come to the conclusion that the rates have reduced, as only VAT
in the range of 12.5% to 14.5% was chargeable, whereas the GST rates on restaurants in the non-
AC category is 12%. Even if someone goes to an AC dine-in, and does not have alcohol, the
GST rates on restaurants are still more or less the same at 18%. However, a 5 star hotel is surely
bound to be a costlier affair.

65
 CHAPTER 4:ANALYSIS AND PRESENTATION OF GST IN
RESTAURANTS

4.1 BASIC ANALYSIS

4.2 GST CALCULATION IN RESTAURANT AND BARS IS EASY

4.3 PRESENTATION OF GST IN RESTAURANTS BY COMPARING OF

RESTAURANTS

4.4 ANALYSIS OF RESTAURANT INDUSTRY

4.5 RESTAURANTS ARE NOW BILLING GST TAX SEPERATELY. IS

THIS JUSTFIED?

4.6 HOW WILL HOTELS AND RESTAURANTS BE AFFECTED BY GST?

4.7 TAXES ON FOOD AND DRINKS IN RESTAURANTS TO GO DOWN

4.8 DATA COLLECTION FROM THE STUDENTS RELATED ABOUT

GST AND GST IN RESTAURANTS THROUGH PIE DIAGRAM

4.1 BASIC ANALYSIS

66
  The introduction of GST has not affected customers, they are happy paying tax.

 The introduction of GST has affected restaurants, because the manager has to pay the
salary to each and every staff member through the profit of restaurants, because before
introduction of GST their was service charges from that charges they use to pay the
salary of the staff members.

 Due to introduction of food apps like swiggy, zomato, etc. They give discounts to their
customers by paying taxes of their customers order.

 There are less chance of black marketing in restaurants sector

 First the tax rate that customer has to pay was 30% but due to introduction of GST the tax
rate that customers have to pay is 9% and maximum is 18%.

4.2 GST Calculation in Restaurants and Bars is Easy

The introduction of Goods and Services Tax aka GST has created some perplexity among
restaurateurs, not to mention diners. Although the slabs are clearly stated in the GST portal and
have been floated everywhere, many restaurants still are confused and end up applying rates and
taxes according to what they interpret, whereas there are few of the others take undue advantage
of the ignorance of people and charge the taxes according to their own wish.

As per Goods and Services Tax 2017, restaurants are divided into 3 categories for this purpose
and accordingly the highest rate of 28% is levied on luxurious or 5-star hotels or restaurants in
the same category, whereas A/C and alcohol-serving restaurants or restro-bars attract 18% GST
and non-AC or non-alcohol serving hotels or restaurants are subject to 12% GST.

All restaurants can't charge GST, the only restaurants that are eligible for the same are those that
are registered. You aren't required to pay GST if the business isn't registered. Make sure you
check whether the restaurant you’re visiting is a registered one or not you can do so by checking
the GST number which is usually given on the restaurant bill.

Also, in your bill, GST may appear twice since this total amount of GST is divided into two parts
out of which one goes to the state funds i.e. SGST (State Goods and Services Tax) and the other
part goes to the Central Government’s exchequer i.e. CGST (Central Goods and Services Tax).
Diners must also check that if GST is applied multiple times in the bill under CGST or SGST
heads, collectively it must not exceed the above mentioned 12%, 18% or 28% threshold and
must charge equal portion. For example, if you go to a non-AC restaurant, the tax rate applicable
is 12% so out of this total 12%, usually 6% is the SGST and 6% is the CGST.

Another point where diners are confused as to whether even after GST, do they have to pay VAT
as well. The simple answer to this question is that in a restaurant GST is applicable on food and
service only and VAT is applicable on alcohol.

67
Let's say, you went to a restaurant and your food bill is ₹1500 with a 10% Service Charge of
₹150 bring this total to ₹1650.

On the other hand, your bill for alcoholic beverages is ₹600, so in this scenario GST will be
applicable on ₹1650 and VAT will be levied on ₹600 i.e. the alcohol bill only.

4.3 PRESENTATION OF GST IN RESTAURANTS BY COMPARING OF

RESTAURANTS

1.TAJ MAHAL PALACE HOTEL

The Taj Mahal Palace Hotel, is a heritage, five-star, luxury hotel built in the Saracenic
Revival style in the Colaba region of Mumbai, Maharashtra, India, situated next to the Gateway
of India. Historically it was known as the "Taj Mahal Hotel" or the "Taj Palace Hotel or simply
"the Taj". The taj restaurant was formed on 16December 1903.

This restaurant is a five-star luxury restaurants. It deal with 28% of GST tax.
There are various tax rate for the hotel in taj hotel. But for restaurant the tax rate under GST is
28%. If you order ice-cream in taj restaurant they charge 18% +28% tax on overall bill amount,
because ice-cream good deal with 18% tax rate

2.AASHIRWAD HOTEL
AASHIRWAD HOTEL is a hotel, two star hotel,built in the italic style in the Ghatkopar region
of Mumbai, Maharashtra, India. The restaurant was formed on 15 March 2001.

This restaurant is a two-star restaurant, It deal with 9% of GST rate. If you order
ice-cream in aashirwad hotel they don’t charge 18% separate GST tax on bill amount, when I ask
them why they don’t charge tax, their answer was “they want to give some benefits for their
customer, so that they can re-visit the restaurant.

4.4 ANALYSIS OF RESTAURANT INDUSTRY

The Indian Restaurant industry today, is worth a staggering INR 247,680 crores and is
developing at a yearly rate of 11% – estimated to hit INR 408,040 crores by 2018. As per the
National Restaurant Association of India’s 2013 India Food Service Report, the segment
comprises of 1.5 million eating outlets, employing 4.6 million people, which again, is projected
to rise to 8 million by 2018. This growth has been fuelled by a combination of factors: the
68
growth of the great Indian middle class, rapid urbanization, growing awareness of western
lifestyles, more women joining the workforce and higher disposable income, to name a few. Not
to forget the organised food services industry – comprising the KFCs, Dominoes and Mc
Donald’s of the world, as well as the rising new age food booking and delivery start-ups like
Swiggy, Foodpanda etc. which are pushing the sector to greater heights.

Post GST, the Government is seeing the opportunity to generate an additional collection of INR
17,000 – 26,000 crores through closer monitoring of tax levy and collection from the
unorganized segment. In short, the restaurant industry is clearly a hot segment, and this calls for
a detailed insight on the impact of GST on restaurants and the associated stakeholders – both
owners, as well as food-lovers across the nation who step out to dine once in a while.

4.5 RESTAURANTS ARE NOW BILLING GST TAX SEPERATELY. IS

THIS JUSTFIED?

Yes, it is totally justified on their part. I also get crossed when I see GST being levied on ice-
creams separately in the bill but we cannot blame the hotels and restaurants for that.

Even before GST, you were paying VAT and/ or Service tax on the mouth-watering foods you
had at these restaurants. You just were not realising it as the price for each item on the menu was
inclusive of taxes.

This explicit visibility of the tax amount is a bit annoying, I agree but if we are to blame anyone
for this, it is the government. They reckon that we ought to know the amount of taxes we pay.

Issue with hotels charging GST:

The main issue, which is unacceptable here is the incorrect pricing adopted by restaurants on
GST’s implementation.

Put yourself in their shoes. Previously, you were paying taxes @1–2% and now you see in a GST
discussion on TV that restaurants shall charge GST @12% minimum.

What would you do in this case? You see that there’s an increase of 10% in the tax rate? What
would you do?

You ask the neighbour next door; your friend who works as an accountant; they all say one thing
and finally you decide yourself that you increase menu rates by 10% flat. Period. Job well done.

You can’t hold him responsible entirely here.

Btw, he doesn’t have the luxury of a tax expert by his side to advise him that there’s a scheme
called composition scheme, by which he can pay GST @5% and simplified returns are required
to be filed only every quarter.

There is no one to tell him,

69
”Listen boss! The Rs 50 you charged previously for that lovely dosa of yours was inclusive of
tax. Now, if you are gonna increase the rates, you have to increase it from their selling price
before taxes. Also, not all is lost. You now have 100% claim to the GST amount you pay on your
purchases for set-off. So, consider this and then increase the price.”

Now, that you’ve come this far, go to that hotel where you feel you are being cheated and share
your knowledge. Just tell him about this and I’m sure he will definitely try to make amends if he
was wrong.

4.6 HOW WILL HOTELS AND RESTAURANTS BE AFFECTED BY GST?

Restaurant owners have more reasons to cheer in the GST regime. Under the VAT regime,
restaurant business owners did not have any option to adjust the output service tax liability with
the credit of input VAT on goods consumed. However, under GST both these taxes will be
subsumed into GST and thus credit of input will be available for adjustment against the output
liability, irrespective of goods and services. GST will bring reasons to rejoice for both consumers
and restaurant owners under the new regime.

Based on the provisions of Model Law, it can be said that hotel sector shall be impacted both
positively and negatively under the GST regime.

(i) The multiple taxes would be replaced by one single tax, the rate of which is likely to be
between 16%-18%. The hotel industry would benefit in the form of lower tax rate which should
help in attracting more tourists in India.

(ii) There are likely to be concerns in valuation of restaurant services in view of the industry
practice of discounts / offers / policies in the form of incentives. The proposed valuation rules are
different from the existing ones and as such this sector need to frame an appropriate policy for
such discounts in advance making it a part of documentation.

(iii) Service providers having centralized registration will have to get registered in each state
whether providing hotel services on own account or through agent (franchise).

(iv) Service providers will have an option to take different registration or separate business
verticals which needs to be examined on case to case basis.

(v) The procedure for all the invoices / receipts towards inward and outward supplies will
become cumbersome as each one of them will have to be uploaded in the system.

(vi) The frequency and number of returns to be filed will go up.

(vii) There is a provision for GST audit if the turnover is more than the prescribed limit.

(viii) The e-commerce companies may have to revamp the current models, as the VAT rate
arbitrage available in the current law may not be available in GST. Tax Collection at Source
(TCS) provisions have been introduced on ecommerce operators in the Model GST Law.

70
However, there are no provisions relating to collection of tax at source under the current tax
regime.

(ix) Alcohol and electricity are out of the purview of GST net. The taxation on alcohol would be
different than the single GST rate. The hotel industry consumes a lot of electricity as a prime
consumable and the levy of electricity duty would also not be covered in GST. Thus, the hotel
industry would not be able to avail the input credit on the two items which will have a negative
impact on this sector.

(x) The hotel industry spends a lot of money on construction and renovation. They have to move
with the times in order to remain competitive and attract customers. The money paid as taxes on
the construction activities cannot be used as input credit to set off the taxes paid on the services
offered by the hotels and restaurants. The R&D cess which is applicable on technical know- how
fees and franchise agreements in the industry is likely to become a part and parcel of GST.

4.7 TAXES ON FOOD AND DRINKS IN RESTAURANTS TO GO DOWN

The impact of GST on food and liquor will be lighter on the pocket as the tax on food and drinks
in air-conditioned restaurants will drop from 20.5 per cent to 18 per cent, whereas non-air-
conditioned restaurants will levy a 12 per cent tax on food and drinks.

With the rollout of the Goods and Services Tax (GST), there will be a considerable impact on
services provided by hotels on food and alcohol.

The impact of GST will be lighter on the pocket as the tax on food and drinks in air-conditioned
restaurants will drop from 20.5 per cent to 18 per cent, whereas non-air-conditioned restaurants
will levy a 12 per cent tax on food and drinks. Till now, customers had to pay a tax component
that consisted of a 14.5 per cent VAT and a 6 per cent service tax.

The restaurants having licence to serve liquor (with full ITC) will levy a tax of 18 per cent, while
those not having the facility of air-conditioning or central heating at any time during the year and
not having licence to serve liquor (with full ITC) will levy tax of 12 per cent. The 5-star hotels
will come under the highest slab of 28 per cent GST.

Liquor had a 6 per cent service tax across segments, which has now been withdrawn.

Advertising

GST, which was launched on the midnight of Friday at a special ceremony in the Central Hall of
Parliament is the most sweeping tax reform since Independence. Prime Minister Narendra Modi

71
on Friday said the GST will be “not only a tax reform but an economic and social reform as
well” that will unify the nation, “check corruption and end harassment at hands of officers”.

4.8 DATA COLLECTION FROM THE STUDENTS RELATED ABOUT

GST AND GST IN RESTAURANTS THROUGH PIE DIAGRAM

ARE YOU AWARE ABOUT GST?

14%

YES NO

87%

INTERPRETATION:

According to this pie diagram, 86% people are aware about GST , on other 14% people are not at
all aware about GST .

72
 IF NO, THEN REASON FOR IT?

OTHER LACK OF KNOWLEDGE

NOT 3%
INTERESTED LACK OF AWARENESS
19% NOT INTERESTED
LACK OF OTHER
LACK OF KNOWLEDGE
AWARENESS 58%
19%

INTERPRETATION:

The reason people are not aware about GST are lack of knowledge, lack of awareness, some are
not interested and some have other reasons for it. 58% people have lack of knowledge about it,
20% are not aware about it, 19% are not interested in it.

ARE YOU AWARE ABOUT THE RATES CHARGED

IN THE RESTAURANTS?
12%

YES
NO

89%

INTERPRETATION:

According to this pie chart, only 88% respondents are aware about the rates charged in the
restaurants. 12% people are unaware about the rates charged in the restaurants.

73
 IS GST AFFECTING PRESENT POSITION OF FOOD
& BEVERAGE INDUSTRY
8%

YE
S

92%

INTERPRETATION:

According to this question, 92% people feel that GST is affecting the present position of food &
beverage industry.

DO YOU FEEL NEGATIVE IMPACT OF GST IN

RESTAURANTS?

YE
NO S
44%
YES
56%

INTERPRETATION:

In this question, 56% people that GST has no negative impact on restaurants, whereas, 44%
people only feel that GST has negative impact on restaurants.

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 DOES GST AFFECT YOU AS A CUSTOMER?
NO
10%

YES
NO

YES
90%

INTERPRETATION:

90% customers responded that GST affects them as a customer, whereas, 10% customers respond
as no, they are not affected because of GST.

WHAT IS CONVENIENT ACCORGING TO YOU?

THERE IS NO
CHANGE
OBSERVED
BY ME
15% BUYING FROM E-COMMERCE
WEBSITES
BUYING PERSONALLY GOING TO
FROM E- RESTAURANT
COMMERCE THERE IS NO CHANGE
WEBSITES OBSERVED BY ME
PERSONALLY 56%
GOING TO
RESTAURANT
29%

INTERPRETATION:

According to this, 56% people feel convenient buying from e-commerce websites like swiggy,
zomato, etc, 29% people feel personally visiting a restaurant is convenient and 15% people have
not observed any changes.

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 ARE THE RATES SET BY GST COUNCIL WORTH?

YES
27%

YES
NO
MAY BE

MAY BE NO
64% 10%

INTERPRETATION:

For this question, 27% people agree with the rates set by GST Council, on the other hand 10%
people do not agree with it and 63% people are doubtful about about the rates set by GST
Council.

TO CONCLUDE, WHAT IS THE IMPACT OF GST IN

RESTAURANTS?

POSITIVE
21%

POSITIVE
NEGATIV
E
NEUTRAL
NEUTRAL NEGATIVE
60% 19%

INTERPRETATION:

76
In this last question, 21% people feel that introduction of GST has brought in positive effect in
restaurants on the other hand 19% people feel it’s a negative impact and 60% people are still not
able to clear their doubts whether it has positive impact or negative impact.

CHAPTER 5: CONCLUSION
Working on this topic was interesting. I have got to know a lot about Impact Of GST In
Restaurants. I have learnt about rates applicable to restaurants, tax rates and applicability.

Food Industry The application of GST to food items will have a significant impact on those who
are living under subsistence level. But at the same time, a complete exemption for food items
would drastically shrink the tax base. Food includes grains and cereals, meat, fish and poultry,
milk and dairy products, fruits and vegetables, candy and confectionary, snacks, prepared meals
for home consumption, restaurant meals and beverages. Even if the food is within the scope of
GST, such sales would largely remain exempt due to small business registration threshold. This
project has given me the knowledge about the GST in restaurant.

It can be concluded that GST has been going to be an historical record for its full fledge
implementation and hopefully this biggest historical reforms will result in case of doing business
in India.
Thus, we can fairly conclude that GST will bring reasons to rejoice for both consumers and
Restaurant owners under the new regime and will have more reasons to explore the new food
joints in our neighbourhood and pamper our taste buds.
It was a good experience working on this project. I have learnt a lot from this project about GST
in Restaurants and also ways to find out frauds and to identify the frauds.

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 INTERVIEW OF RESTAURANT OWNNER

NAME OF RESTAURANT: RADHA KRISHNA

NAME OF OWNER: SHRIDHAR SHETTY

HOTEL STAR: 2 STAR HOTEL

LOCATION: GHATKOPAR

RATING OF HOTEL:4.5 STAR

Q.1. IS THE RESTAURANT REGISTERED WITH GST?

ANS: YES, WE ARE REGISTERED WITH GST.

Q.2 WHAT IS THE IMPACT OF GST ON YOUR RESTAURANT?

ANS: GST ANSWERS ABOUT IT. ONE COUNTRY ONE TAX. IT CLEARS ALL THE
AMBIGUITY AROUND RESTAURANTS FROM THE BUSINESS AS WELL AS
CUSTOMERS PERSPECTIVE.

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Q.3. WHAT ELSE YOU WOULD LIKE TO SAY ABOUT GST?

ANS: RESTAURANTEURS WILL NOW BE ABLE MAKE A MORE EFFICIENT CHOICE

OF SUPPLIERS. I WISH TO OPEN NEW BRANCHES WORLDWIDE , THIS IS NOW
POSSIBLE BECAUSE OF GST WHICH HAS BROUGHT IN ONE COUNTRY ONE TAX.
AND I AM SURE THIS WILL HAVE A RIPPLE EFFECT ON HOW BUSINESSES WORK
IN INDIA.

Q.4. WHAT WOULD YOU SAY IS GST HAVING A POSITIVE EFFECT OR NEGATIVE
EFFECT?

ANS: ACCORDING TO ME GST HAS BROUGHT IN POSITIVE EFFECTS. GST ALLOWS

EVERYONE TO PAY A SHARE OF TAXES AND THEREFORE WILL EXPAND TAX
BASE IN INDIA.

Q.5. HOW DO YOU CHARGE YOUR CUSTOMERS ON THE FOOD THEY EAT OR SAME
FOR ALL?

ANS: NO. WE DON`T CHARGE ON THE FOOD THEY EAT. IT’S THE SAME RATE FOR
ALL.

Q.6.WHY YOU DON’T CHARGE GST ON CUSTOMERS BILLS?

ANS.WE DON’T CHARGE GST ON THE CUSTOMERS BECAUSE WE WANT TO GIVE

BENEFITS TO OUR CUSTOMERS,SO THEY CAN COME TO OUR RESTAURANT
AGAIN AND AGAIN ,BUT WE PAY GST TAXES TO GOVERNMENT BECAUSE IT IS
OUR RIGHT TO PAY TAX.

Q.7.CAN YOU REVEAL THE PROFIT OF YOUR RESTAURANT AFTER

INTRODUCTION OF GST?

ANS. NO WE CANT REVEAL THE PROFIT OF OUR RESTAURANT.

Q.8.SO CAN YOU SAY IS PROFIT INCREASING OR DECREASING AFTER

INTRODUCTION OF GST?

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ANS. THE PROFIT IS NOT RAPID INCREASING,BUT THE PROFIT IS QUITE HIGH AS
COMPARE TO BEFORE,BUT IT IS INCREASING AND DECREASING QUITE STAGE.

Q.9. DO YOU AGREE/DISAGREE ABOUT GST CHARGE IN RESTAURANT

ANS.YES I AGREE ABOUT GST CHARGE IN RESTAURANT, BECAUSE SEE THE GST
IS CHARGE FOR THE WELFARE OF THE COUNTRY.SO BEING PART OF THE
COUNTRY, THE PERSON RIGHT IS TO PAY TAX. AND BY PAYING TAX THEY ARE
WELFARING THEMSELVES.

Q.10. WHAT ARE YOUR OPINION ABOUT GST?

ANS. SO IT IS A GOOD INITATIVES BY THE GOVERNMENT OF INDIA BY

IMPOSSING THE GST TAX IN INDIA.

Q.11. WHAT DO YOU THINK INTRODUTION OF GST HAS IMPACT ON BLACK

MARKET LIKE CHARGING ANY RATE ON GOODS RELATED TO FOOD?

ANS. YES,FIRST THE WHOLESELLER WE USED TO DEAL HE WAS NOT GIVING US

PROPER TYPE OF BILL BUT NOW DUE TO INTRODUCTION OF GST,HE IS ALSO
NOW REGISTER UNDER GST SO NOW HE GIVE US PROPER BILL.

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 BIBLIOGRAPHY/REFERENCE
Information is collected from various sources such as:
BOOKS:
TEXT BOOKS
REFERENCE BOOKS

NEWSPAPAR:
THE ECONOMIC TIMES

WEBSITES:
TAX GURU
CLEAR TAX

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