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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 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

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.

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