How to Pay Your Restaurant Bills Post GST?

If you are gourmet lover and have a preference to eat at restaurants, this article is for you. With the introduction of new tax regime, Goods and Service Tax, there is ample confusion among the people regarding its rate and implementation. As service tax is merged in this new regime, your restaurant bill is also changed in the terms of taxes charged.

GST has subsumed taxation of all types of indirect taxes which were collected till now in the form of entertainment tax, Octroi, VAT, excise, et al. As much as 17 indirect taxes and 22 types of cess are merged in this new taxation system called GST. To take advantage of this situation, it is seen that many restaurants have begun charging inappropriate taxes under the name of GST. And amid this confusion, people are paying for it.

Before the implementation of GST, your restaurant bill used to have three prominent charges on food, Service charge, Service Tax, and VAT. Here, service tax and VAT were mandatory while service charge cannot be forced. Typically, ten percent service charge was levied earlier which was on your own discretion to pay or not.

TOTAL 400 Service Charge @ 10% 40 Service Tax @ 14% 24.64 KKC (Cess) @ 0.5% 0.88 SBC (Cess) @ 0.5% 0.88 VAT @ 14.5 % 58 Grant Total 524.4

Now, GST will be implemented on food bills at restaurants as such: ·        

  • Non AC Restaurants/ Eateries/ Local Delivery Restaurants not serving liquor: 12% GST (6% CGST + 6% SGST) ·        
    AC restaurants not servicing liquor: 18%
  • AC restaurants not servicing liquor: 18% ·        
    Non-AC restaurants serving liquor: 18%
  • Non-AC restaurants serving liquor: 18% ·        
    Pre-cooked/ Pre-packed food/ Snacks: 12%
  • Pre-cooked/ Pre-packed food/ Snacks: 12%
All GST rates indicated above depend on different circumstances. However, actual tax will be lesser due to higher inventory of input tax credit. Looking at conclusion, it is observed that post GST implementation; there will be a sharp cut in the taxes charged on the food bills.

Keep in mind that no one can charge 28% tax on a restaurant. On the other hand, the government has asked restaurant owners to pass this benefit to consumers and cut down the rates of food items as they are able to set off their taxes against input credits under GST.

Remember that GST is not implemented on liquor or liquor products. As usual, VAT will be charged on such drinks. If you have food and liquor at restaurant, you will be charged VAT on drink and GST on food.

Another thing that should be noted is that restaurants, that have a turnover less than 75 lakhs and opted for composition scheme, will charge flat 5% tax instead of 12 or 18%.

If you are thinking that how would you know that restaurant owner is integrated with composition scheme, a hoarding or banner for mentioning the same is made compulsory by the government to display at a restaurant. Hence, there is complete transparency in taxes charged on restaurants.