GST on Catering Services – Rates, ITC & Invoice Rules

 Catering to Pre-GST Times

For Example, Kumar went to a reputed restaurant in Mumbai, which was known for its top-notch service and tongue-tingling food. After enjoying his food, he received the bill of ₹ 1,002 for the following foods:

• 4 pieces of Butter Naan (₹ 40 per piece): ₹ 160
• 1 Paneer Butter Masala: ₹ 180
• 1 Veg Mixed Fried Rice: ₹ 210
• 1 Gobi 65: ₹ 150
• 1 Cool Drinks: ₹40

Base Price for the Foods: ₹ 740

• VAT: 14%
• Service Tax: 8%
• Service Charge: 10%

Kumar grew furious upon seeing a service tax on the bill and a ₹100 tip demand by the waiter. When he questioned the manager, he was told it was a service charge, not a tax. Disgusted, Kumar cursed the restaurant and wished for a new tax system to end such scams.

This blog delineates the GST on catering services.

 How is the GST Charged?

The new GST taxation replaced the previous multilevel taxes, which indirectly looted money from the consumers, and led many restaurants to evade taxation.  The following GST rates are generally charged for the catering services, including restaurants, and other catering services:

• Food or catering services with or without air-conditioning 5%
• Catering Services without ITC 5%
• Outdoor Catering services 18%

Now, Kumar went to the same restaurant and ordered the same food, which compelled him to pay VAT, service tax, and sales tax.

• Still, the base price for the ordered foods is ₹ 740
• The air-conditioned restaurant adds only the GST rate of 5%

The total payable amount is ₹ 777. He looked at the waiter and gave ₹ 50 as a tip out of his empathy. The way the restaurant manager looked at Kumar clearly said that he had been defeated. Kumar felt happy as the curse had power, and his wish became true.

 GST for Food, State-level VAT for Alcohol

The GST rates are common for all restaurants across different state borders. However, the value-added tax (VAT) still exists for alcohol. Let’s say that an alcohol-lover went to bar-cum-restaurant which is air-conditioned, and orders different foods to enjoy his time:

• 1 Gobi 65: ₹ 150
• 1 Mixed Non-Veg Fried Rice: ₹ 350
• A 1 litre alcohol: ₹ 6,500

Here, the consumer gets 5% GST for the ordered foods, and the payment of ₹ 525. But for the alcohol, the restaurant charges 14% VAT for the price of ₹ 6,500, and the total payable amount is ₹ 7,410.

The total bill amount is ₹ 7,935 (₹ 525 + ₹ 7,410).

Disclaimer: The VAT for alcohol differs from one state to another state which also includes Union Territories.

Types of Service and their GST Rate
 

Example:

1. Food or Catering Service at Restaurants

Suppose Kumar operates two kinds of restaurants, namely air-conditioned and non-air-conditioned, then the 5% GST rate is applicable.

If a customer’s bill amount is ₹ 2,500, in either of the restaurant types, then the 5% GST rate is ₹ 125

• Total Payable Amount: ₹ 2,625

2. Outdoor Catering Services

Suppose Kumar runs an outdoor catering service for events like marriage, conferences, and other special occasions, then he needs to charge a GST of 18%.

If the he charges for the bill amount of ₹ 2,50,000, then the 18% GST is ₹ 45,000

• Total Payable Amount: ₹ 2,95,000

Kumar can also claim Input Tax Credit (ITC) if the annual turnover exceeds ₹ 20,00,000.

3. Corporate Catering Services

This is a popular and emerging catering service, usually conducted on a contract basis. If Kumar takes a corporate catering service, he can charge a 5% GST rate.

Suppose, if the full meal is ₹ 120, he can add 5% of GST, which is ₹ 6.

• Total Payable Amount: ₹ 126

4. Hotel or Banquet Catering Service

Under this service, Kumar has two GST Rates, namely:

• To charge 5% if the room tariff is less than ₹ 7,500.
• To charge 18% if the room tariff is more than ₹ 7,500.

Suppose, if Kumar’s hotel room of price more than ₹ 7,500 provide the catering service, with the bill of ₹ 60,000, then the GST is ₹ 3,000.

• Total Payable Amount: ₹ 63,000

Is Kumar Eligible for ITC?

• If the Kumar charges 5% GST, then he is not required for GST-registration and eligible for ITC claim.
• If he charges 18% GST, then he is eligible for ITC and should have registered his catering business with GST.

Annual Turnover Criteria

• Suppose if Kumar’s annual turnover exceeds ₹ 20,00,000 lakhs, then it is mandatory to register for GST. This criteria comes under Normal Category.
• Suppose if Kumar’s annual turnover exceeds ₹ 10,00,000 lakhs, then it is mandatory to register for GST. This criteria comes under Special Category.

Catering Service with GST Exemptions

Meal Schemes: If Kumar has taken a contract on Meal Schemes, supported by the government, then he is exempted from all GST rates, namely 5% or 18%.

Catering for Charitable Services: If Kumar provides catering services to a non-profit organisation (NGO), he is exempted from GST rates. He may also charge a lesser amount is ₹ 40,000, which is also optional.

Catering to Educational Institutions: Some educational institutions come with GST exemptions, as they come with an educational package. Such institutions are also run by certain charity groups. If Kumar offers his catering services, he is exempted from GST.

Conclusion

Today, the introduction of GST taxation has replaced the erstwhile multiple layers of taxes, which indirectly collected money from the consumers. This taxation helps the government to compute tax bills, and also helps them from preventing money laundering. Consumers like Kumar, hereafter, do not need to pay any extra costs for the food services.  

FAQs
 

1. What is the GST rate for air-conditioned restaurants?

The GST rate for air-conditioned restaurants is 5%

2. Which catering service is eligible for an ITC claim?

Those who charge 18% GST can claim ITC. However, if the annual turnover is more than ₹ 20,00,000 or ₹ 10,00,000, depending on the categories, such catering needs to file GST.

3. What is the GST rate for Individual Catering Services?

This type of catering attracts 5% of GST.

4. What is the GST for Catering or food services at rented venues for special events?

This type of catering gets 18% GST.

5. Is GST mandatory for catering services?

Yes, it is mandatory for catering services, except for some categories.

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