Income Tax GST and other laws to know to open a Restaurant or Hotel or Cloud Kitchen or food chain in India – This article will be helpful to all upcoming businesses and existing business get an idea of the Income Tax, GST and other laws applicable to them in India especially in state of Rajasthan.
Income Tax – Income Tax GST and other laws to know to open a Restaurant
As per Section 2(31) of Income Tax Act, 1961, person includes Individual, Hindu undivided Family (HUF), company, firm, LLP, Association of Person (AOP) or Body of Individuals (BOI), local authority & Artificial Judicial Person (AJP).
All the above type of persons can carry businesses in any of the above categories. Business tax filing has to be done by all types of persons as per above definition. The Applicable slab rates & tax rates including surcharge and cess has been discussed further below in this article.
Expert Opinion is required to identify which type of person will be beneficial for assessee based on their requirements. Our Experts at Tax Ledger Advisors can help a person assist which type of person should be opted to run Restaurant or Hotel or Cloud Kitchen or Food Chain in Udaipur, Rajasthan.
Slab Rate for Individuals FOR F.Y. 2021-22 & A.Y. 2022-23 are
Individuals being one of the type of Person as per Income, have to do business tax filling.
For details article on slab rates of individuals refer link>> https://www.taxledgeradvisor.com/salaried-tax-filing/
Tax Rate for Partnerships/LLP FOR F.Y. 2021-22 & A.Y. 2022-23 are
Partnerships/LLPs being a type of Person as per Income, have to do business tax filling. Applicable tax rates are:-
- For the AY 2022-23, a Partnership Firm (including LLP) is taxable at 30% along with surcharge & cess.
- Surcharge is levied @12% on the amount of income tax if Total Income exceeds 1 crore.
- Health & Education cess @4% shall also be paid on the amount of income tax plus Surcharge (if any).
- Marginal Relief available, in case Net Income exceeds ₹ 1 crore, the amount payable as income tax and Surcharge shall not exceed the total amount payable as income tax on Total Income of ₹ 1 crore by more than the amount of income that exceeds ₹ 1 crore
Slab Rate for AOP/BOI/AJP FOR F.Y. 2021-22 & A.Y. 2022-23 are
AOP/BOI/AJP being a type of Person as per Income, have to do business tax filling. Applicable tax rates are:-
| AOP/BOI/AJP Total Income | Tax Rate |
| Up to 2,50,000 | Nil |
| 2,50,000 – 5,00,000 | 5% |
| 5,00,000 – 10,00,000 | 12,500 + 20% above INR 5,00,000 |
| Above 10,00,000 | 112,500 + 30% above INR 10,00,000 |
Slab Rate for AOP/BOI/AJP FOR F.Y. 2021-22 & A.Y. 2022-23
However, taxation of AOP/BOI has to checked on further conditions which are given below:
| Nature of AOP/BOI | AOP/BOI Assessment |
| Shares of members of AOP/BOI determined | Where income of all of the members does not exceeds basic exemption limit, income of AOP / BOI shall be taxable as per slab rates given in above table. If income exceed than taxed at Maximum Marginal Rate (i.e., 30% plus surcharge and HEC as applicable). But if total income of any member of AOP / BOI is taxable at a rate higher than Maximum Marginal Rate, then income of AOP / BOI shall be chargeable to tax as follows: Portion of income attributable to such member shall be taxable at such high rate as applicable to that member Balance portion of income shall be taxable at the Maximum Marginal Rate of tax |
| Shares of members of AOP/BOI not determined | Income is assessed at Maximum Marginal Rate. However, if total income of any member is assessed at a rate higher than Maximum Marginal Rate, income of AOP / BOI is assessed at that higher rate. |
Further Condition to check before applying tax rate on AOP/BOI
- Income Tax Surcharge is levied on the amount of income tax at following rates if total income exceeds specified limits:
- 10% – Taxable income above INR 50 lakh – Up to ₹ 10 crore
- 15% – Taxable income above INR 1 crore – Up to ₹ 2 crore
- 25% – Taxable income above INR 2 crore – Up to ₹ 5 crore
- 37% – If taxable income above INR 5 crore
- Maximum Surcharge on income u/s 111A, 112A and 115AD is 15%
- Income Tax Health & Education cess @4% shall also be paid on the amount of income tax plus Surcharge (if any).
- Income Tax Marginal Relief available of Surcharge, the amount payable as Surcharge shall not exceed the income earned exceeding INR 50 lakh, 1 crore, 2 crores & 5 crores as the case may be.
Please Note : An AOP / BOI who’s adjusted total income exceeds ₹ 20 lakh shall be liable to pay Alternate Minimum Tax (AMT) at 18.5% of adjusted total income (plus surcharge and Health and Education cess as applicable), where the normal tax liability is less than 18.5% of adjusted total income.
Tax Rate for Local Authority for F.Y. 2021-22 & A.Y. 2022-23 are
Local Authority being a type of Person as per Income, have to do business tax filling. Applicable tax rates are:-
- For the AY 2022-23, a Local Authority is taxable at 30% along with surcharge & cess.
- Income Tax Surcharge is levied @12% on the amount of income tax if Total Income exceeds 1 crore.
- Income Tax Health & Education cess @4% shall also be paid on the amount of income tax plus Surcharge (if any).
- Income Tax Marginal Relief available of Surcharge, In case Net Income exceeds ₹ 1 crore – the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of ₹ 1 crore by more than the amount of income that exceeds ₹ 1 crore.
Tax Rate for Domestic Companies for F.Y. 2021-22 & A.Y. 2022-23 are
Domestic Companies being a type of Person as per Income, have to do business tax filling. Applicable tax rates are:-
| Particulars | Tax Rate |
| Turnover or Gross Receipt in previous year 2018-19 not exceed ₹ 400 crores | 25% |
| If opted for Section 115BA | 25% |
| If opted for Section 115BAA | 22% |
| If opted for Section 115BAB | 15% |
| Any other Domestic Company | 30% |
Tax Rate for Domestic Companies FOR F.Y. 2021-22
- Income Tax Surcharge is levied on the amount of income tax at following rates if total income exceeds specified limits:
- 7% – Taxable income above ₹ 1 crore– Up to ₹ 10 crore
- 12% – Taxable income above ₹ 10 crore
- 10% – If Company opting for taxability u/s 115BAA or Section 115BAB
- Income Tax Health & Education cess @4% shall also be paid on the amount of income tax plus Surcharge (if any).
- Income Tax Marginal Relief available of Surcharge, the amount payable as Surcharge shall not exceed the income earned exceeding INR 1 crore & 10 crores.
Tax Rate for Foreign Companies for F.Y. 2021-22 & A.Y. 2022-23
Foreign Companies being a type of Person as per Income, have to do business tax filling. Applicable tax rates are:-
- For the AY 2022-23, a Foreign Company is taxable at 40%.
- Income Tax Surcharge is levied on the amount of income tax at following rates if total income exceeds specified limits:
- 2% – Taxable income above INR 1 crore – Up to INR 10 crores
- 5% – Taxable above INR 10 crore
- Income Tax Health & Education cess @4% shall also be paid on the amount of income tax plus Surcharge (if any).
- Income Tax Marginal Relief available of Surcharge, the amount payable as Surcharge shall not exceed the income earned exceeding INR 1 crore & 10 crores.
ITR Forms which can be used for business tax filing
Business tax filing of return would require businesses to select the form which would be applicable to them based on sources of income and type of business. ITR Forms applicable which can be used by business are as follows:
- ITR – 3: ITR-3 can be filled by person if ITR-1,2 & 4 are not applicable to him. ITR -3 can be filed by individuals and HUF having gains from business & profession. He can have Income from Salary. No limit on number of house properties and agriculture income.
- ITR – 4: Individuals or HUF with a total Income of up to INR 50,00,000 having income from salaries, one house property, other sources, and agricultural income up to Rs.5,000 and have income from business & profession computed on presumptive taxation basis under section 44AD/ 44ADA/ 44E.
- ITR – 5 – This form can be used by Firm, LLP AOP, BOI, AJP, Local Authority Representative Assessee referred to in Section 160(1)(iii) or (iv), Cooperative Society, Society registered under Societies Registration Act, 1860 or under any other law of any State, Trust other than Trusts eligible to file Form ITR-7, Estate of Deceased Person, Estate of an Insolvent, Business Trusts and Investments Fund.
- ITR – 6 – The Form can be used by Domestic Companies not claiming exemption under Section 11 & Foreign Companies.
- ITR – 7 – This form can be used by:
- Companies who are required to file return as per Section 139(4A)
- Every person whose income is derived from property held under trust or other legal obligation wholly for charitable or religious purposes or of income related to voluntary contributions – Section 139(4A)
- Chief Executive Officer of Political Party – Section 139(4B)
- Research Association – Section 139(4C)
- News Agency – Section 139(4C)
- Education Institution, College or University, Hospital – Section 139(4D)
- Local Authority
- Other category of person whose income is unconditionally exempt Under Section 10
GST – Income Tax GST and other laws to know to open a Restaurant
Applicability of GST
GST registration can be obtained voluntarily by a restaurant or Hotel or Cloud Kitchen or Food chain irrespective of turnover. GST registration becomes mandatory if a person or entity sells goods or services beyond a certain turnover.
For Restaurants For Service Providers if aggregate turnover exceeds INR 20 lakhs in a year is compulsorily required to obtain GST registration. However, for special category states, aggregate turnover limit for service providers is INR 10 lakhs.
Goods Suppliers if aggregate turnover exceeds INR 20 lakhs in a year is compulsorily required to obtain GST registration. However, for special category states, aggregate turnover limit for service providers is INR 10 lakhs.
As per Notification No. 10/2019 dated 07 Mar, 2019 a special benefit was given to persons who is exclusively involved in supply of goods and whose aggregate turnover does not exceed INR 40 Lakhs. Also, the benefit is available only to person who are not compulsorily required to obtain registration under Section 24 or they are not supplier of pan masala, Ice cream and other edible ice, whether or not containing cocoa or All goods, i.e., Tobacco and manufactured tobacco substitutes.
Applicable GST Rates
| Chapter/Heading | Description of Services | SGST | CGST |
|---|---|---|---|
| Heading 9963 | i) Supply of “hotel accommodation‟ having value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent. | 6% | 6% |
| Heading 9963 | ii) Supply of “restaurant service‟ other than at specified premises. | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken 2.5% | 2.5% |
| Heading 9963 | iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms. | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken 2.5% | 2.5% |
| Heading 9963 | iv) Supply of ‘outdoor catering’, at premises other than ‘specified premises’ provided by any person other than- (a) suppliers providing ‘hotel accommodation’ at ‘specified premises’, or (b) suppliers located in ‘specified premises’. | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken 2.5% | 2.5% |
| Heading 9963 | v) Composite supply of “outdoor catering” together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) at premises other than “specified premises” provided by any person other than- (a)suppliers providing “hotel accommodation” at “specified premises”, or (b)suppliers located in specified premises | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken 2.5% | 2.5% |
| Heading 9963 | vi) Accommodation, food and beverage services other than (i) to (v) above Explanation: (a) For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv)and (v) above shall attract central tax prescribed against them in column CGST & SGST subject to conditions specified, which is a mandatory rate and shall not be levied at the rate as specified under this entry. (b) This entry covers supply of restaurant service at “specified premises” (c) This entry covers supply of “hotel accommodation‟ having value of supply of a unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent (d) This entry covers supply of “outdoor catering”, provided by suppliers providing “hotel accommodation‟ at “specified premises” or suppliers located in “specified premises”. (e)This entry covers composite supply of “outdoor catering‟ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) provided by suppliers providing “hotel accommodation‟ at “specified premises”, or suppliers located in “specified premises” | 9% | 9% |
*(specified premises means premises providing hotel accommodation service having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent)
Place of Supply
As per Section 12, The place of supply will be checked as per point no I & II below, if location of supplier & recipient is in India.
I. The place of supply of services :-
- by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel
- by way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property
- any services ancillary to the services
shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located.
Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.
II. The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.
As per Section 13, the place of supply will be checked as per point no I & II below, if location of supplier & recipient is outside India.
Relevant section from Act link >> https://taxinformation.cbic.gov.in/content-page/explore-act/1000620/1000001/hotel/ACTS
Place of supply – supply of service attributable to different states/union territories
I. The place of supply of services :-
- by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel
- by way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property
- any services ancillary to the services
WHERE IMMOVABLE PROPERTY IS LOCATED IN MORE THAN ONE STATE OR UNION TERRITORY shall be taken for each of the respective state or union territory. However, in case of absence of clear bifurcation for supply of service in each state or union territory in shall be determined in following manner :
| Service Type | Manner of attributing supply for each state |
|---|---|
| by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel and such property is located in 2 or more state or union territories ( exception if single property in multiple states then refer last point ) | In proportion to night stayed in immovable property of each of the state or union territory |
| by way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property and such property is located in 2 or more state or union territories | In proportion to area of immovable property lying in each of the state or union territory |
| by way of lodging accommodation by a house boat or any other vessel and services ancillary to such services | In proportion to time spent in each of the state or union territory ( declaration to be submitted by service provider ) |
Time of Supply
Time of supply in case of restaurant service will usually be date of issue of invoices.
The reference from the Act is as follows :
“In case of supply of services, time of supply is earliest of –
- the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed or Date of payment as per books of account or date of debit in bank account, whichever is earlier; or
- the date of provision of service, if the invoice is not issued within the period prescribed or the date of receipt of payment, whichever is earlier; or
- the date on which the recipient shows the receipt of services in his books of account, in a case where above do not apply
*Where it is not possible to determine time of supply using above methods, time of supply would be in a case where a periodical return has to be filed, be the date on which such return is to be filed or in any other case, be the date on which the tax is paid”
Applicability of Reverse Charge Mechanism (RCM)
Categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator:
- services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
Availability of Input Tax Credit
Exemptions
| Chapter/Heading | Description of Services | CGST | SGST |
| Heading 9963 or Heading 9972 | Services by way of renting of residential dwelling for use as residence | Nil | Nil |
| Heading 9963 or Heading 9972 or Heading 9995 or any other Heading of Section 9 | Services by a person by way of-(a) conduct of any religious ceremony; (b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act: Provided that nothing contained in entry (b) of this exemption shall apply to,- (i) renting of rooms where charges are one thousand rupees or more per day; (ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day; (iii) renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month. | Nil | Nil |
| Heading 9963 | Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent | Nil | Nil |
Other Laws – Income Tax GST and other laws to know to open a Restaurant
ENTITILEMENT CERTIFICATE
FSSAI LICENSE
BUSINESS REGISTRATION NUMBER (BRN)
MSME REGISTRATION
LIQUOR LICENSE
LIFT CLEARANCE
HEALTH/TRADE LICENSE
EATING HOUSE LICENSE
FIRE SAFETY LICENSE
MUSIC LICENSE
CERTIFICATE OF ENVIRONMENT CLEARANCE
SIGNAGE LICENSE
FAQs
Can restaurant charge GST from customers ?
Yes, GST is consumption based indirect tax which has to be charged from customers and deposited into government account.
Tax on restaurant/food in India ?
Income Tax GST and other laws to know to open a Restaurant or Hotel or Cloud Kitchen or food chain in India – This article will be helpful to all upcoming businesses and existing business get an idea of the Income Tax, GST and other laws applicable to them in India especially in state of Rajasthan.
Is GST mandatory for cloud kitchen ?
GST is mandatory if value of supply exceeds 20 lakhs in a year.
What are the requirements to open a cloud kitchen ?
Income Tax GST and other laws to know to open a Restaurant or Hotel or Cloud Kitchen or food chain in India – This article will be helpful to all upcoming businesses and existing business get an idea of the Income Tax, GST and other laws applicable to them in India especially in state of Rajasthan.
Is GST mandatory for food business ?
GST is mandatory if value of supply exceeds 20 lakhs in a year.
What is GST for hotel food ?
Is GST included in restaurant food ?
Most of cases restaurant charge GST separately in the bill.
GST on food in 5 star hotels ?
Earlier 28% GST was chargeable on food in 5 star hotels. Current rate is 18%. Refer link >> https://www.taxledgeradvisor.com/?p=936&preview=true&_thumbnail_id=952#Applicable_GST_Rates
GST on restaurant services under regular scheme ?
Refer link >> https://www.taxledgeradvisor.com/?p=936&preview=true&_thumbnail_id=952#Applicable_GST_Rates
GST rate on restaurant service notification ?
Refer link https://cbic-gst.gov.in/gst-goods-services-rates.html
Restaurant food HSN Code and GST Rate ?
Refer link >> https://www.taxledgeradvisor.com/?p=936&preview=true&_thumbnail_id=952#Applicable_GST_Rates
FSSAI license for cloud kitchen
Refer link >> https://www.taxledgeradvisor.com/fssai-license/
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