Impact of GST on Restaurants

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The  GST Council headed by the Finance Minister has approved a four slab tax rate of 5%, 12%,18%, and 28% respectively according to the types of goods and services and set up the final platform for the GST implementation.

Restaurants had the compulsion to go for VAT registration once their business had crossed a turnover of more than 5 lakhs to 10 lakhs annually in the previous taxation regime. With the implementation of GST, it would be good news for a Restaurant owner who has an annual turnover of fewer than 10 lakhs in Northeastern states and Rs 20 lakhs in other states.

How GST affect Restaurant food cost?

The present Indian food Industry is of Rs 2,47,680 crore and is projected to grow to Rs 4,08,040 crore by 2018, providing a much bigger opportunity for new restaurant players.

The food service industry has shown a rapid growth to date and is projected to grow at a much higher pace under the GST regime as the service tax and VAT amount will be sub summed into a single tax.

There are a number of factors going to affect the restaurants after the implementation of GST.  The spices, tea, coffee and mustard oil which are taxed at 3 to 9 percent will be put back in the first slab of 5% tax rate. The processed food items which fall in the range of 9% to 15% in the previous taxation regime will be in the second slab of 12% in the new GST regime. The restaurants that are serving liquor and aerated drinks will now be charged a 28% tax rate plus cess. Cess will be levied on top of the higher tax rate.

When you eat in a Non-AC restaurant, you have to pay 12% as tax. Which comprises Central GST (6%) and State GST (6%). However, if you are in an AC restaurant, you will have to pay an 18% tax doesn’t matter if it serves alcohol or not.

You will have to pay a 12% tax on the snacks pre-packed and pre-cooked.  There is no GST is levied on liquor or liquor products. However, liquor will attract VAT, as imposed by the respective state.

Also read,

GST from the Mirror of Chanakya Arthshastra

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  1. This article of yours is covering all the factors that needs to be covered about the impact of GST in restaurants. It will help a lot of new people who are trying to open up their own restaurants and also to the people who are not aware of it.


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