With the recent changes in GST Rate for Restaurants, Quick eateries, Food delivery services where the GST Rate is reduced from earlier 12% to now 5%. Those who are charging 5% cannot claim Input Tax Credit (ITC).
Govt of India took this decision as it is 1) hard for the businesses (SMEs) to claim ITC from the unorganized groceries and other raw material suppliers. 2) Restaurants are not passing the ITC benefit to their customers.
While this move is invited across all Indian hotel, restaurant associations, and consumers, many of the
“Restaurant businesses who were registered as Composition OR converted from Regular to Composition should not charge GST Rate @ 5%.”
Continue to charge 5% rate as a regular business is illegal, and the Excise and Tax Officials may take stern action against them.
Per Composition scheme businesses cannot charge their customers of any GST Tax.
We are advising our clients in the Hotel, restaurant businesses need to aware of it and make the necessary changes in their pricing, and invoicing structure immediately.
More to it, if you moved from Regular to Composition businesses in Oct 2017, you still need to file your GST Returns for Jul, Aug, Sep and follow Composition returns afterwards. If you do not have any business during any month or Quarter, you must file GST NIL Returns.