After the introduction of GST on 01-Jul-17, the Government introduced different rates for GST on restaurant bills – non AC (12%) and AC restaurants (18%). Various taxes and cess were brought under a GST rate. However, Service Charge continues to exist, and so does VAT.
During its 23rd meeting recently on 10-Nov-17, the GST Council has revised the GST on restaurant bills as below:
GST 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.
1. All stand-alone restaurants irrespective of AC or non AC, will attract 5% GST (without Input Tax Credit)
2. Food parcels (or takeaways) will also attract 5% GST (without Input Tax Credit)
3. Restaurants in hotel premises having room tariff of less than Rs.7,500 per unit per day will attract GST of 5% (without Input Tax Credit)
4. Restaurants in hotel premises having room tariff of Rs.7,500 and above per unit per day (even for a single room) will attract GST of 18% (with full Input Tax Credit)
5. Outdoor catering will continue to be at 18% (with full Input Tax Credit)
6. Restaurants who have opted for composition scheme under GST, with an aggregate turnover of up to Rs. 75 lakh will also charge GST @ 5%. The turnover limit is Rs. 50 lakh in Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh
As per the earlier system, restaurants could claim Input Tax Credit on the tax that they paid – for rent, raw material and so on. That facility is no longer available to them and there is a possibility that food prices on the menu will be hiked to compensate for this “loss” although restaurants may try to ensure that the overall amount paid by customers remains the same as before 15-Nov-17.
Here’s what you should also 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 5% is applicable, it may be shown as CGST – 2.5% and SGST – 2.5%
– 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 and ongoing 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, and avoid being overcharged 😉