The Goods & Services Tax was introduced from 01-Jul-17. Even over a month later, there continues to be confusion on how and where GST is levied, as well as the applicable rate. A hot topic of discussion continues to be the GST impact on restaurant bills, with diners still posting pictures of their bills on social media channels like Twitter and Facebook, wondering if the calculations are correct/incorrect.
Although there have been several announcements and clarifications issued by the Government on GST, questions still seem to keep cropping up, so here’s what you should keep in mind when eating out in a restaurant or having food delivered home.
GST impact on restaurant bills
Your restaurant bill had Service Charge, Service Tax, Swachh Bharat Cess, Krishi Kalyan Cess, Value Added Tax (VAT) – on both food and alcohol. Our post on understanding your restaurant bill had explained how these charges were levied.
Various taxes and cess were brought under one single GST rate. Service Charge continues to exist, and so does VAT.
There is a broad classification for restaurants – whether AC or non-AC and if they serve liquor or don’t, and the GST rate applicable on each of them.
1. AC Restaurant (whether serving liquor or not) – 18%
2. Non-AC restaurant – 12%, and 18% if serving liquor
3. Restaurant with both AC and Non-AC sections – 18%
4. Pre-cooked or pre-packed snacks from restaurants – 12%
5. Food parcel cooked as per order – GST rate as per applicable rate for food in that restaurant
6. Restaurants who have opted for composition scheme under GST, with an aggregate turnover of up to Rs. 75 lakh will charge GST @ 5% instead of 12 or 18%. The turnover limit is Rs. 50 lakh in Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh
Here’s what you should keep in mind to avoid being overcharged:
Goods and Services Tax (GST)
– is levied on all food bills
– is not levied on liquor
– is applied on Service Charge (if levied by restaurant)
– may be shown separately as CGST (Central) or SGST (State) in the bill
For eg, if 18% is applicable, it may be shown as CGST – 9% and SGST – 9%
– usually between 5-10%
– is not a Government tax or levy
– not levied on delivery/takeaway orders
– cannot be enforced, and is voluntary*
* As per a Government guideline in April this year, Service Charge is not mandatory and cannot be imposed from the moment a customer walks in. Only after the meal is completed can a customer assess the service and choose to pay the service charge in the bill. Restaurant owners say this is only a guideline, not an order – so this is still a contentious issue.
Value Added Tax (VAT)
– is a State Government levy
– levied only on liquor
– not levied on food
– rate varies from 5-25% depending on which State the restaurant is located in
Service Tax, Swachh Bharart Cess, Krishi Kalyan Cess
– do not exist any more
Keep an eye on your restaurant bill the next time you’re dining out 😉