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GST on restaurant and food industry bill

GST is a unified method of indirect taxation. A “one nation one tax” slogan which will change the of taxes levied under various names like service tax, value added tax, entertainment tax, etc. These various types of charges will be combined to serve a single purpose; an indirect tax on the final product. This GST will then be divided among the Centre and State as Central GST(CGST) and State GST(SGST). Charges for each would be authorized based on income and acceptability, among other elements. Except for those goods and services that have been exempted, SGST and CGST will be applicable on all products and services. Both Centre and States would have jurisdiction for the determination of tax rates and for all taxpayers based on the threshold for products and services that have been prescribed.
     The proposed rate for GST is a four-tiered structure of 5%, 12%, 18% and 28%. The hotel industry has been driven at an 18% rate.

Impact of GST

It is expected that the creation of the Goods and Service Tax act and its implementation will have a great effect on numerous factors of an organization in India by modifying the standard pattern of pricing the products and services.
The Goods and Service Act will have a great impact on the tax system in India by minimizing the unfavorable result of a tax on the expense of goods and services. GST is expected to modify the total indirect tax system by impacting the tax structure, tax computation, credit utilization and tax frequency. It will also support in supply chain optimization.
The originators of the Goods and Service Tax believe that the implementation of this act would make the tax process much more transparent, fair and effective. Thus, the introduction of Goods and Services Tax is an important move taken the Indian Government to reform taxation in India. It will support in creating a single nationwide industry by merging many Central and State taxes under a one single tax procedure. No doubt, the implementation of GST will take time, but it is likely to create much more employment options and economic inclusion.

Current Taxation System & GST
Currently, the hospitality and restaurant industry is charged by multiple taxes such as Value Added Tax, Service Tax, and luxury tax, etc. The present system, every State has a right to levy their own tax on the products coming into for sale and consumption, while the Centre levies taxes on the manufacture of the products. Whereas GST will prevent the number of taxation occurring on certain products, and make a certain transparency with regards to the price of taxation and the complete amount that goes to the government as taxes on a product.
Current indirect tax regime.
•For hotels with room tariff in excess of Rs 1,000 and above, service tax is applicable at 60% of room tariff (9%) in addition to VAT (ranging between 12 to 14.5%) and luxury tax wherever applicable.
•In a case of restaurants on the F&B bills, service tax is applicable on 40% of the bill or an effective rate of 6%   apart from VAT @12 to 14.5%.
• As input credit from central taxes cannot be set-off against VAT liability and vice-versa, this leads to cascading effect.
•Restaurants with an annual turnover of less than Rs 50 lakh will be able to avail of a composition scheme and pay a flat tax of 5% (2.5% central GST and 2.5% state GST) as the GST Council decided to widen the ambit of this scheme.
GST on hotel services will be based on the type of room you stay in. If the room tariff is less than Rs 1,000, your stay will be tax-free. However, if the room tariff is between Rs 1,000 - Rs 2,500, you'll be taxed 12 per cent. It the tariff is between Rs 2,500 to Rs 5,000, the stay will be taxed at 18 per cent. For luxury hotels, exactly where the tariffs are much more than Rs 5,000, GST rate of 28 per cent will be applicable.
•Restaurants with a turnover of significantly less than Rs 50 lakh will be levied a tax rate of 5 per cent. Non-AC restaurants will be charged 12 per cent GST on foods bill. The tax rate for AC restaurants and those with a liquor license will be 18 per cent, whereas restaurants in five-star hotels will attract a GST rate of 28 per cent.
•Eating out will get costlier in cities like Mumbai where the existing tax price is about 10.6 per cent - which involves both VAT and Service Tax. Post GST, the clients will be taxed at 18 per cent in AC restaurants.
•For a non-AC restaurant in Mumbai, the existing tax rate is at 6 per cent. Post GST, the clients will be taxed at 12 per cent. 

Under GST, the benefits are:-
Administrative Ease
The introduction of GST will remove a variety of other taxes and cesses to prevail as the only charge that hotels need to account for. This means a reduction in procedure steps and much more options to streamline the taxation approach.
Clarity for Customers
How numerous instances do we, as clients, care to verify exactly where the tax actually is going? For an end user, it is even now tough to differentiate among a VAT and an entertainment tax. The hotel customer will only see a single charge on their bill and that provides them a better idea of the expense they are incurring for the providers and products utilize.
Time Saving and Improved Quality
The elimination of plenty of entries from the hotel’s guide of accounts in the name of various taxes implies lesser time to approach a transaction. This also implies that the client will get their orders more quickly and fresher and room reservations turn into a simple breezy approach!
Take the current taxes in the state of Maharashtra for instance. The taxes on hotel rooms are presently 19% (Luxury Tax = 10% plus Service Tax= 9%) and these in the F&B section are 18.5% (VAT= 12.5% plus Service tax= 6%). Compare these charges with the GST at flat 18%, you can see the advantages are not substantial, i.e., 1% and 0 .5% cost savings for rooms and F&B respectively.
Now ikonnect-rms has been updated to GST Ready Restautrant Software.Simplify your restaurant management & its tax calculations with us.


  1. Great Stuff !!
    As per recent notification on Integrated tax(gst) few restaurants are taxable @ 5%.Can refer[]
    Keep up the good work.

  2. Thanks for sharing the wonderful information.epos software for hospitalityI appreciate your post and keep sharing and updating


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