Sem 4 Project (Impact of GST On Restaurants) 1

Prahladrai Dalmia Lions College Of Commerce & Ecomnomics.
INDEX
Chapter Title Page

No. no.
1 Introduction 1
2 Research Methodology
2.1 Before GST And After GST Of India 2
3 Objectives 5
4 Literature Review 6
5 History Of GST 7
6 SWOT 9
7 Advantages and Disadvantages 12
8 Tax 16
9 Data Analysis
9.1 Goods And Services Tax Network (GSTN) 18
9.2 Benefits And Impact Of GST To The Indian 19
Economy.
9.3 Evolution Of Goods And Service Tax In 21
India
9.4 Impact Of GST On Restaurants. 23
9.5 Emerging Challenges In The GST On 31
Restaurants.
9.6 Changes In GST On Restaurants. 37
10 Case Study 38
11 Conclusion 41
12 Responses To The Survey Form
13 Bibliography / Webliography 42
14 Appendix 43
Prahladrai Dalmia Lions College Of Commerce & Economics.
CHAPTER:-1
INTRODUCTION
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the
supply of goods and services. It is a comprehensive, multistage, destination-based tax:
comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to
be refunded to all parties in the various stages of production other than the final consumer and
as a destination-based tax, it is collected from point of consumption and not point of origin like
previous taxes.
Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%,
18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under
GST and instead are taxed separately by the individual state governments, as per the previous
tax system. There is a special rate of 0.25% on rough precious and semi-precious stones and
3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like
aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods
was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.
The tax came into effect from 1 July 2017 through the implementation of the One Hundred and
First Amendment of the Constitution of India by the Indian government. The GST replaced
existing multiple taxes levied by the central and state governments.
The tax rates, rules and regulations are governed by the GST Council which consists of the
finance ministers of the central government and all the states. The GST is meant to replace a
slew of indirect taxes with a federated tax and is therefore expected to reshape the country's 2.4
trillion dollar economy, but its implementation has received criticism. Positive outcomes of the
GST includes the travel time in interstate movement, which dropped by 20%, because of
disbanding of interstate check posts.
Impact of GST on Restaurant.

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CHAPTER:-2
RESEARCH METHODOLOGY
2.1 – BEFORE GST AND AFTER GST OF INDIA.
Pre-GST Tax Structure in India
Central Government levied taxes on the following:

• Income Tax: Tax collected on the income of an individual
• Customs duties: Duties collected on the exports and imports of goods
• Service tax: Taxes gathered on various services
• Central excise: Taxes on Manufacturing of dutiable goods
State Governments levied the following taxes:
• Value Added Tax (VAT): Sales of goods involve the particular tax. The sales of the goods
in intrastate are covered by the VAT Law of that state, whereas those among the inter-state is
levied by the Central Sales Tax Act. Even the revenue gathered as per the Central Sales Tax
Act is done by the State Governments and the Central Government has no role in it.
• Stamp duties and Land Revenue: Since land is a matter on which only State Governments
can govern, thus the Stamp duties on transfer of immovable properties are levied by State
Governments.
• State Excise on Liquor and certain agricultural goods.
In India, indirect taxes are in vast numbers as there were several of taxes to be incurred on
manufacture, import, and sale and even purchase in certain cases. Further the law was
governed less by the Acts and more by day to day notifications, circulars and orders by the
Governing bodies. Further there are some local indirect taxes levied like Local Body Taxes
(LBT) or Octroi.
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SHORTCOMINGS IN THE PRESENT STRUCTURE AND NEED OF GST

1. Tax Dropping: The most significant contributing factor to tax cascading is the partial
coverage by Central and State taxes. Sectors that are exempted are not allowed to claim credit
for the Cenvat or the Service Tax paid on the inputs.
2. Levy of Excise Duty on manufacturing point: The CENVAT is levied on goods
manufactured or produced in India. Restricting the tax to the point of manufacturing is a
severe obstruction to an effective and unbiased application of tax. For example, valuation as
per excise valuation rules of a product, whose consumer price is Rs. 100/-, is, say, Rs. 70/-. In
such a case, excise duty as per the present provisions is payable only on Rs.70/-, and not on
Rs.100/-.
3. Complexity in determining the nature of transaction – Sale vs. Service
4. States are unable to levy taxes on services: they have no powers to collect tax on incomes
or the fastest growing constituents of consumer expenditures, the States have to rely almost
exclusively on compliance improvements or rate increases for any flexibility in their own-
source revenues.
5. Lack of Uniformity in Provisions and Rates
6. Fixation of situs – Local Sale vs. Central Sale
7. Interpretational Issues: whether an activity is sale or works contract; sale or service, is not
free from doubt in many cases.
Post-GST Tax Structure in India
Under the new tax regime, there will be 3 kinds of Goods and Services Taxes:
CGST: where the revenue will be collected by the central government
SGST: where the revenue will be collected by the state governments for intra-state sales
IGST: where the revenue will be collected by the central government for inter-state sales

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As per the proposed Tax system, the input of Central GST can be used only for payment of
CGST & the input of State GST can be used only for payment of SGST. Cross- Utilization of
input of CGST in payment of SGST and vice-a- versa, is not allowed.
The notion of having one merged indirect tax in place of several previously existing indirect
taxes is to benefit the Indian economy in a number of ways:
• It will help the country’s businesses gain a level playing field
• It will put us on par with foreign nations who have a more structured tax system
• It will also translate into gains for the end consumer who not have to pay cascading taxes
any more
• There will now be a single tax on goods and services

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CHAPTER:-3
OBJECTIVES
1. The foremost objective of GST is to create a common market with uniform tax rate in
India. (One Nation, One Tax, One Market)
2. To eliminate the cascading effect of taxes, GST allows set-off of prior taxes for the
same transactions as input tax credit.
3. To boost Indian exports, the GST already collected on the inputs will be refunded and
thus there will be no tax on all exports.
4. To increase the tax base by bringing more number of tax payers and increase tax
revenue.
5. To simplify tax return procedures through common forms and avoidance of visiting tax
departments.
6. To provide online facilities for payment of taxes and submission of forms. Goods and
Services Network (GSTN), a robust Information Technology system has been created
for the operation of GST.

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CHAPTER:-4
REVIEW OF LITERATURE.
The research paper (Nisa, 2017) evaluate the impact of GST on India’s foreign trade. It highlights that
GST will make life easier for businesses in India due to development of common national market.
With even taxation and cost effectiveness owing to reduced time and costs in transportation, one
obvious effect would be that ‘Made in India’ products would now be more cost competitive in the
global markets.
The research paper (Dr. D. Amutha, 2018) discuss the economic consequences on Indian economy
due to introduction of GST. The paper also discusses the future predictions and obstacles for GST
implementation. It states that GST is enormous concept which simplifies current tax system in India.
The research paper (Sehrawat, 2015) focus on advantages of GST and challenges faced by India in
execution. It also highlights that its implementation stands for a coherent tax system which will
subsume most of current indirect taxes which in long term will lead to higher output, more
employment opportunities and flourish GDP.
The research paper (S. Thowseaf, 2016) studied the benefit of Goods and Services Tax on the
economy, business, industry and consumer and analyze the implementation strategy of GST in India.
If GST properly implemented with tax exemption for certain goods like agricultural commodities, it
will result in increasing revenue at the Centre as the tax collection system becomes more clear,
making tax avoidance problem vanish and leading to economic growth, helping Indian people regain
the wealth lost within country.
The research paper (Nayyar, 2018) concluded that all sectors in India - manufacturing, service,
telecom, automobile and small SMEs will bear the impact of GST. One of the biggest taxation
reform- GST will bind the entire country under a single taxation system rate. As predicted by experts,
GST will improve tax collections and boost up India’s economic development and discontinue all tax
barriers between State and Central Government.
The research paper (Bhattacharjee, 2018) evaluates the impact of GST after implementation and
completion of one year. It emphasis that now government officials and experts have also been
considering the need to make several changes in the GST architecture e.g. taking off the 28% tax
bracket and shifting towards fewer tax-slabs by merging 12% and 18% rates, taking in electricity, real
estate sector and petroleum products under its purview in a systematic way. It also simplify the
submission by taking out the requirement of submission of so many returns at short intervals,
besides improving the strength of anti-evasion measures.
The research paper (Adhana, 2015) concluded that Government should be very clear with the fact
that for smooth working of GST, the Information Technology/Infrastructure should also be properly
developed throughout India. Government should take the state government into assurance to
implement the GST. Furthermore all effort should be made to include all the items under GST so that
no item will left outside the preview of GST otherwise the main purpose of introducing GST will
defeat.

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CHAPTER:-5
HISTORY OF GST.
Formation
The reform of India's indirect tax regime was started in 1986 by Vishwanath Pratap Singh,
Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value
Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance
Minister Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the
state level. A single common "Goods and Services Tax (GST)" was proposed and given a go-
ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his
economic advisory panel, which included three former RBI governors IG Patel, Bimal
Jalan and C Rangarajan. Vajpayee set up a committee headed by the Finance
Minister of West Bengal, Asim Dasgupta to design a GST model.The Asim Dasgupta
committee which was also tasked with putting in place the back-end technology and logistics
(later came to be known as the GST Network, or GSTN, in 2015). It later came out for rolling
out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a
task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee
recommended rolling out GST as suggested by the 12th Finance Commission.
After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election and the
election of a Congress-led UPA government, the new Finance Minister P Chidambaram in
February 2006 continued work on the same and proposed a GST rollout by 1 April 2010.
However, in 2011, with the Trinamool Congress routing CPI(M) out of power in West
Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an
interview that 80% of the task had been done. In the 2014 Lok Sabha election, the Bharatiya
Janata Party-led NDA government was elected into power. With the consequential
dissolution of the 15th Lok Sabha, the GST Bill – approved by the standing committee for
reintroduction – lapsed. Seven months after the formation of the then Modi government, the
new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP
had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement
GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for
GST. However, the Opposition, led by the Congress, demanded that the GST Bill be again
sent back for review to the Select Committee of the Rajya Sabha due to disagreements on
several statements in the Bill relating to taxation. Finally, in August 2016, the Amendment
Bill was passed. Over the next 15 to 20 days, 18 states ratified the Constitution amendment
Bill and the President Pranab Mukherjee gave his assent to it.
A 21-member selected committee was formed to look into the proposed GST laws. After
GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the
Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods
and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation
to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha
on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017 and were then
enacted as Acts on 12 April 2017. Thereafter, State Legislatures of different States have
passed respective State Goods and Services Tax Bills. After the enactment of various GST
laws, Goods and Services Tax was launched all over India with effect from 1 July 2017. The
Jammu and Kashmir state legislature passed its GST act on 7 July 2017, thereby ensuring that
the entire nation is brought under a unified indirect taxation system. There was to be no GST

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on the sale and purchase of securities. That continues to be governed by Securities

Transaction Tax (STT).
Implementation Of GST.
The GST was launched at midnight on 1 July 2017 by the President of India, and
the Government of India. The launch was marked by a historic midnight (30 June – 1 July)
session of both the houses of parliament convened at the Central Hall of the Parliament.
Though the session was attended by high-profile guests from the business and the
entertainment industry including Ratan Tata, it was boycotted by the opposition due to the
predicted problems that it was bound to lead for the middle and lower class Indians. The tax
was strongly opposed by the opposing Indian National Congress. It is one of the few
midnight sessions that have been held by the parliament - the others being the declaration of
India's independence on 15 August 1947, and the silver and golden jubilees of that
occasion. After its launch, the GST rates have been modified multiple times, the latest being
on 22 December 2018, where a panel of federal and state finance ministers decided to revise
GST rates on 28 goods and 53 services.
Members of the Congress boycotted the GST launch altogether. They were joined by
members of the Trinamool Congress, Communist Parties of India and the DMK. The parties
reported that they found virtually no difference between the GST and the existing taxation
system, claiming that the government was trying to merely rebrand the current taxation
system. They also argued that the GST would increase existing rates on common daily goods
while reducing rates on luxury items, and affect many Indians adversely, especially the
middle, lower middle and poorer income groups.

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CHAPTER:-6
SWOT ANALYSIS ON GST

What is SWOT analysis?
SWOT analysis is an acronym for strengths, weaknesses, opportunities and threats and is
Structured planning method that evaluates those four elements of an organization, projects or
Business venture. It helps us to focus in our strengths, minimize threats and take the greatest
Possible advantage of opportunities available to us.
Strengths of Goods and Service Tax in India:

1.It will dropping out the cascading effects of tax on production and distribution of
Goods and services which will competitiveness and consequently, GDP will increase.
2.It will apply all goods and services except some exempted products.
3.GST replaces service tax, excise, VAT and over a dozen local levies. All goods and
Services are now classified under four tax slabs of 5%, 12%, 18% and 28%.
4.Tobacco is not exempted from the GST. It is treated as sin goods and come under the
Taxation with central excise tax.
5.Alcohol, real estate, custom duty and electricity are exempted from GST. (proposed
Article, 366(12A) ).
6.Benefits from GST to following elements:
A) 5% GST –previous rates –Medicines-11%, Footwear below Rs.500 –14.41%,
Renewable energy devices –17.18%, Iron ore –17.18%.
B) 12% GST –previous rates –Mobile Phones –20.02%, Readymade garments –
18.16%, Contact lenses –18%, Processed food –14% .
C)18% GST –previous rates –Cars for handicapped 20 to 22%.
These basic needs such as medicines, cars for handicapped, readymade garments
Would be less than their pervious taxes which would be beneficial for customers.
Weaknesses of GST system in India:

Some sectors are unhappy by GST rates:
1.Textile Industry: Even through every variety of cloth has different tax rates, it
Required them to change their entire tax logs and incorporate the change. They were

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Very comfortable with the existing tax system.

2.Brick manufacturers: Brick manufacturers from fly ash (thermal based power plant
Bricks) have to pay 28% tax as opposed to the chimney –based bricks which continue
To pay 5%.
3.Scientific apparatus makers: Which deals with its manufacturing and trade, are not
Happy with GST. They now have to pay 18% as opposed to the earlier 5.25%.
4.Auto: Small cars will become slightly expensive as they now will fall under the 28%
Tax bracket.
5.Tea, coffee, masala –It is taxed 5% under GST. Previously it was 3 to 4 percent.
Tea/coffee are the basic drinks and by charging more consumer would have to pay
More on tea stalls than before.
6.FMCG: While soaps and toothpaste will be cheaper, other personal care products like
Shampoos and deodorants will be more expensive post GST.
Opportunities of GST in India:

1.The rates of tax are set at ground level which will help states and union to collect
More revenue.
261Journal of Management and Science ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special
Issue. No.1 | Sep’17
2.It will reduce the transaction costs and wastages of scareresources because at one
Registration people can do transactions from States and Unions. So, it will connect the
Whole nation from a single click.
3.In indirect tax structure multiple taxes were charged from taxpayers. But GST will
Eliminate the taxes on chain of transactions.
4.GST is also known as “one point single taxation system”. This is a helping hand for
Businessman’s, they can come to agreement on price modalities, supply chain etc,,
Without thinking too much about taxes imposed on them at later stages.
5.GST will reduce average tax burden of consumers. They will be certain about their
Taxes which will reduce evasion of taxes.
6.GST can provide the opportunity of Corruption Free Indian Revenue Services. The
Root of corruption found in political system. It will bring transparency in Indian
Political system.
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Threats of GST in India:

1.School fees, courier services, mobile charges, insurance premiums, banking charges,
Wi-Fi, direct-to-home services will get costlier.
2.Inter-states supply of goods and services are considered as import and IGST will be
Applied (1%) in addition to custom duties.
3.The Central government promised for compensation to loss making states for a period
Of 5 years. The compensation will be as: 100% for first 3 years, 75% for 4thyear and
50% for 5thyear. So, it is possible that all states do not implement it in effective
Manner to get compensation.
4.GST is not friendly with banking sector. Because the cost of goods become cheaper
After GST and it will promote export. Presently, 14% service tax is being levied on
Banking transactions. GST will make these transactions more costly. Over and above,
In most of countries banking sector is excluded from GST.
5.GSTC (Goods and service Tax Council) will set the benchmark for resolving the
Dispute on recommendations of GSTC. It means GSTC will lay down the criteria for
GSTC itself. It is against the principle of natural justice.
6.GST is not a guarantee in itself that it would not be influenced by political parties and
Politicians will not use it as a win-lossgame.

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CHAPTER:-7
ADVANTAGES AND DISADVANTAGES.
Advantages of GST
1. GST eliminates the cascading effect of tax
GST is a comprehensive indirect tax that was designed to bring the indirect taxation under
one umbrella. More importantly, it is going to eliminate the cascading effect of tax that was
evident earlier.
Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this example to
understand what is Tax on Tax:
Before GST regime:
A consultant offering services for say, Rs 50,000 and charged a service tax of 15% (Rs
50,000 * 15% = Rs 7,500).
Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT (Rs 20,000 *5% =
Rs 1,000).
He had to pay Rs 7,500 output service tax without getting any deduction of Rs 1,000 VAT
already paid on stationery.
His total outflow is Rs 8,500.
Under GST
GST on service of Rs 50,000 @18% 9,000
Less: GST on office supplies (Rs 20,000*5%) 1,000
Net GST to pay 8,000
2. Higher threshold for registration

Earlier, in the VAT structure, any business with a turnover of more than Rs 5 lakh (in most
states) was liable to pay VAT. Please note that this limit differed state-wise. Also, service tax
was exempted for service providers with a turnover of less than Rs 10 lakh.
Under GST regime, however, this threshold has been increased to Rs 20 lakh, which exempts
many small traders and service providers.
Let us look at this table below:

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Tax Threshold Limits
Excise 1.5 crores
VAT 5 lakhs in most states
Service Tax 10 lakhs
GST 20 lakhs (10 lakhs for NE states)
3. Composition scheme for small businesses

Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can benefit as it gives an
option to lower taxes by utilizing the Composition scheme. This move has brought down the
tax and compliance burden on many small businesses.
4. Simple and easy online procedure
The entire process of GST (from registration to filing returns) is made online, and it is super
simple. This has been beneficial for start-ups especially, as they do not have to run from pillar
to post to get different registrations such as VAT, excise, and service tax.
5. The number of compliances is lesser
Earlier, there was VAT and service tax, each of which had their own returns and
compliances. Below table shows the same:
Under GST, however, there is just one, unified return to be filed. Therefore, the number of
returns to be filed has come down. There are about 11 returns under GST, out of which 4 are
basic returns which apply to all taxable persons under GST. The main GSTR-1 is manually
populated and GSTR-2 and GSTR-3 will be auto-populated.

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6. Defined treatment for E-commerce operators

Earlier to GST regime, supplying goods through e-commerce sector was not defined. It had
variable VAT laws. Let us look at this example:
Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had to file a VAT
declaration and mention the registration number of the delivery truck. Tax authorities could
sometimes seize goods if the documents were not produced.
Again, these e-commerce brands were treated as facilitators or mediators by states like
Kerala, Rajasthan, and West Bengal which did not require them to register for VAT.
All these differential treatments and confusing compliances have been removed under GST.
For the first time, GST has clearly mapped out the provisions applicable to the e-commerce
sector and since these are applicable all over India, there should be no complication regarding
the inter-state movement of goods anymore.
7. Improved efficiency of logistics
Earlier, the logistics industry in India had to maintain multiple warehouses across states to
avoid the current CST and state entry taxes on inter-state movement. These warehouses were
forced to operate below their capacity, giving room to increased operating costs.
Under GST, however, these restrictions on inter-state movement of goods have been
lessened.
As an outcome of GST, warehouse operators and e-commerce aggregators players have
shown interest in setting up their warehouses at strategic locations such as Nagpur (which is
the zero-mile city of India), instead of every other city on their delivery route.
Reduction in unnecessary logistics costs is already increasing profits for businesses involved
in the supply of goods through transportation.
8. Unorganized sector is regulated under GST
In the pre-GST era, it was often seen that certain industries in India like construction and
textile were largely unregulated and unorganized.
Under GST, however, there are provisions for online compliances and payments, and for
availing of input credit only when the supplier has accepted the amount. This has brought in
accountability and regulation to these industries.

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Disadvantages of GST
1. Increased costs due to software purchase
Businesses have to either update their existing accounting or ERP software to GST-compliant
one or buy a GST software so that they can keep their business going. But both the options
lead to increased cost of software purchase and training of employees for an efficient
utilization of the new billing software.
2. Being GST-compliant
Small and medium-sized enterprises (SME) who have not yet signed for GST have to quickly
grasp the nuances of the GST tax regime. They will have to issue GST-complaint invoices, be
compliant to digital record-keeping, and of course, file timely returns. This means that the
GST-complaint invoice issued must have mandatory details such as GSTIN, place of supply,
HSN codes, and others.
3. GST will mean an increase in operational costs
As we have already established that GST is changing the way how tax is paid, businesses will
now have to employ tax professionals to be GST-complaint. This will gradually increase
costs for small businesses as they will have to bear the additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance, further increasing
their overhead expenses.
4. GST came into effect in the middle of the financial year
As GST was implemented on the 1st of July 2017, businesses followed the old tax structure
for the first 3 months (April, May, and June), and GST for the rest of the financial year.
Businesses may find it hard to get adjusted to the new tax regime, and some of them are
running these tax systems parallelly, resulting in confusion and compliance issues.
5. GST is an online taxation system
Unlike earlier, businesses are now switching from pen and paper invoicing and filing to
online return filing and making payments. This might be tough for some smaller businesses
to adapt to.
6. SMEs will have a higher tax burden
Smaller businesses, especially in the manufacturing sector will face difficulties under GST.
Earlier, only businesses whose turnover exceeded Rs 1.5 crore had to pay excise duty. But
now any business whose turnover exceeds Rs 20 lakh will have to pay GST.
However, SMEs with a turnover upto Rs 75 lakh can opt for the composition scheme and pay
only 1% tax on turnover in lieu of GST and enjoy lesser compliances. The catch though is
these businesses will then not be able to claim any input tax credit. The decision to choose
between higher taxes or the composition scheme (and thereby no ITC) will be a tough one for
many SMEs.

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CHAPTER:-8
TAX.
Taxes subsumed
The single GST subsumed several taxes and levies, which included central excise
duty, services tax, additional customs duty, surcharges, state-level value added tax and
Octroi. Other levies which were applicable on inter-state transportation of goods have also
been done away with in GST regime. GST is levied on all transactions such as sale, transfer,
purchase, barter, lease, or import of goods and/or services.
India adopted a dual GST model, meaning that taxation is administered by both the Union
and state governments. Transactions made within a single state are levied with Central GST
(CGST) by the Central Government and State GST (SGST) by the State governments. For
inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied
by the Central Government. GST is a consumption-based tax/destination-based tax, therefore,
taxes are paid to the state where the goods or services are consumed not the state in which
they were produced. IGST complicates tax collection for State Governments by disabling
them from collecting the tax owed to them directly from the Central Government. Under the
previous system, a state would only have to deal with a single government in order to collect
tax revenue.
HSN code
India is a member of World Customs Organization(WCO) since 1971. It was originally using
6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs
and Central Excise added two more digits to make the codes more precise, resulting in an 8
digit classification. The purpose of HSN codes is to make GST systematic and globally
accepted.
HSN codes will remove the need to upload the detailed description of the goods. This will
save time and make filing easier since GST returns are automated.
If a company has turnover up to INR 15 million in the preceding financial year then they did
not mention the HSN code while supplying goods on invoices. If a company has turnover
more than INR 15 million but up to INR 50 million, then they need to mention the first two
digits of HSN code while supplying goods on invoices. If turnover crosses INR 50 million
then they shall mention the first 4 digits of HSN code on invoices.
Rate
The GST is imposed at variable rates on variable items. The rate of GST is 18% for soaps and
28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for
tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100 and 28%
on commercial vehicle and private and 5% on readymade clothes. The rate on under-
construction property booking is 12%. Some industries and products were exempted by the
government and remain untaxed under GST, such as dairy products, products of milling
industries, fresh vegetables & fruits, meat products, and other groceries and necessities.
Checkposts across the country were abolished ensuring free and fast movement of
goods. Such efficient transportation of goods was further ensured by subsuming octroi within
the ambit of GST.

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The Central Government had proposed to insulate the revenues of the States from the impact
of GST, with the expectation that in due course, GST will be levied on petroleum and
petroleum products. The central government had assured states of compensation for any
revenue loss incurred by them from the date of GST for a period of five years. However, no
concrete laws have yet been made to support such action. GST council adopted concept paper
discouraging tinkering with rates.
E-Way Bill
An e-Way Bill is an electronic permit for shipping goods similar to a waybill. It was made
compulsory for inter-state transport of goods from 1 June 2018. It is required to be generated
for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the threshold
limit of ₹50,000 (US$700).
It is a paperless, technology solution and critical anti-evasion tool to check tax leakages and
clamping down on trade that currently happens on a cash basis. The pilot started on 1
February 2018 but was withdrawn after glitches in the GST Network. The states are divided
into four zones for rolling out in phases by end of April 2018.
A unique e-Way Bill Number (EBN) is generated either by the supplier, recipient or the
transporter. The EBN can be a printout, SMS or written on invoice is valid. The GST/Tax
Officers tally the e-Way Bill listed goods with goods carried with it. The mechanism is aimed
at plugging loopholes like overloading, understating etc. Each e-way bill has to be matched
with a GST invoice.
Transporter ID and PIN Code now compulsory from 01-Oct-2018.
It is a critical compliance-related GSTN project under the GST, with a capacity to process 75
lakh e-way bills per day.
Intra-State e-Way Bill
The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, Telangana and Uttar
Pradesh, which account for 61.8% of the inter-state e-way bills, started mandatory intrastate
e-way bill from 15 April 2018 to further reduce tax evasion. It was successfully introduced in
Karnataka from 1 April 2018. The intrastate e-way bill will pave the way for a seamless,
nationwide single e-way bill system. Six more states Jharkhand, Bihar, Tripura, Madhya
Pradesh, Uttarakhand and Haryana will roll it out from 20 April 18. All states are mandated
to introduce it by 30 May 2018.
Reverse Charge Mechanism
Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax on
behalf of unregistered, smaller material and service suppliers. The receiver of the goods is
eligible for Input Tax Credit, while the unregistered dealer is not.
The central Government released Rs 35,298 crore to the state under GST compensation. For
the implementation, this amount was given to the state to compensate the revenue. Central
government has to face many criticisms for delay in compensation.
Goods kept outside the GST
 Alcohol for human consumption (i.e., not for commercial use).

 Petrol and petroleum products (GST will apply at a later date), i.e., petroleum crude,
high-speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel.

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CHAPTER:-9
DATA ANALYSIS
9.1 – GOODS AND SERVICES TAX NETWORK (GSTN)

The GSTN software is developed by Infosys Technologies and the Information Technology
network that provides the computing resources is maintained by the NIC. "Goods and
Services Tax Network" (GSTN) is a non-profit organisation formed for creating a
sophisticated network, accessible to stakeholders, government and taxpayers to access
information from a single source (portal). The portal is accessible to the Tax authorities for
tracking down every transaction, while taxpayers have the ability to connect for their tax
returns.
The GSTN's authorised capital is ₹10 crore (US$1.4 million) in which initially the Central
Government held 24.5 percent of shares while the state government held 24.5 percent. The
remaining 51 percent were held by non-Government financial institutions, HDFC and HDFC
Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment holds 10% and LIC
Housing Finance holds 11%.
However, later it was made a wholly-owned government company having equal shares of
state and central government.

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9.2 - BENEFITS AND IMPACT OF GST TO THE INDIAN

ECONOMY.
Benefits of GST to the Indian Economy
 Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and
Excise.
 Less tax compliance and a simplified tax policy compared to current tax structure.
 Removal of cascading effect of taxes i.e. removes tax on tax.
 Reduction of manufacturing costs due to lower burden of taxes on the manufacturing
sector. Hence prices of consumer goods will be likely to come down.
 Lower the burden on the common man i.e. public will have to shed less money to buy the
same products that were costly earlier.
 Increased demand and consumption of goods.
 Increased demand will lead to increase supply. Hence, this will ultimately lead to rise in
the production of goods.
 Control of black money circulation as the system normally followed by traders and
shopkeepers will be put to a mandatory check.
 Boost to the Indian economy in the long run.
These are possible only if the actual benefit of GST is passed on to the final consumer. There
are other factors, such as the seller’s profit margin, that determines the final price of goods.
GST alone does not determine the final price of goods.
How will GST impact the Indian Economy?
 Reduces tax burden on producers and fosters growth through more production. The current
taxation structure, pumped with myriad tax clauses, prevents manufacturers from
producing to their optimum capacity and retards growth. GST will take care of this
problem by providing tax credit to the manufacturers.
 Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved
items being transported. This penalty transforms into major costs due to higher needs of
buffer stock and warehousing costs. A single taxation system will eliminate this roadblock.
 There will be more transparency in the system as the customers will know exactly how
much taxes they are being charged and on what base.
 GST will add to the government revenues by extending the tax base.

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 GST will provide credit for the taxes paid by producers in the goods or services chain.
This is expected to encourage producers to buy raw material from different registered
dealers and is hoped to bring in more vendors and suppliers under the purview of taxation.
 GST will remove the custom duties applicable on exports. The nation’s competitiveness in
foreign markets will increase on account of lower costs of transaction.

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9.3 – EVOLUTION OF GOODS AND SERVICE TAX IN INDIA.
India introduced a comprehensive multistage value added tax (VAT) system, known as Goods
and Services Tax (GST), on 1 July 2017. Indian GST encompasses various indirect taxes from
union and state tax bases. In a federal system, the harmonisation of tax rules, regulations, rates,
processes and procedures across states is expected to improve the ease of doing business,
encourage investment and produce economic growth.
The objective of this book is to provide a comprehensive overview of the journey towards
introduction of the GST in India. The book is based on research carried out at the National
Institute of Public Finance and Policy (NIPFP), New Delhi, spanning over a decade. The basic
objective of the volume is to highlight the contributions of the chapters in shaping the design
and structure of the GST as well as capturing the evolution of the concept of GST in India since
the late 1980s. The Indian GST is unique for its structure, design and administrative framework.
The country-specific experience discussed in the chapters will help the readers to familiarise
themselves with the alternative arrangements available from the perspective of a federal
country. Designing a destination-based dual value-added tax (VAT) system for a federal
country like India was a challenge. In this volume an attempt is made to capture the historical
journey of policy research that was initiated since the inception of the government’s interest in
a national-level GST for India in the union budget speech of 2006–07. The book is divided into
three parts – Genesis and Evolution of the Concept of GST in India, Revenue Neutrality of
GST and GST Administration and the Possible Impact of GST on the Indian Economy.
The successive tax reform committees constituted since Independence played an important role
in shaping the Indian indirect tax system that finally culminated in the introduction of GST.
The recommendations of various tax reforms committees helped in sequencing tax reforms and
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also paved the way for establishing destination based tax regime in Indian indirect tax system.
For a federal country like India, having a fairly decentralised system of fiscal arrangement,
sequencing of tax reforms plays an important role in minimising the disruption from major tax
reforms such as GST.
The GST regime is evolving in many different ways – it is evolving in structure as well as in
the associated compliance and administrative regimes. The evolution is desirable and helpful
in as much as it addresses the concerns faced by the taxpayers. However, the evolution also
implies a long transition before the regime achieves stability, which in turn introduces an
element of uncertainty into the regime. The positive gains from GST would be associated partly
with the structure of the new regime and partly with stability in the regime. In other words, the
timeline for the economy to experience the gains from GST might be extended beyond the
initial years.
What is, however, very interesting is that the graduated transition to the ‘ideal’ GST regime
seems to have resulted in the Indian economy bypassing some of the anticipated shocks in the
form of an increase in inflation or a reduction in growth rate. The overall context of the
economy, however, is beset with a number of potential problems – increase in the international
price of crude oil and stress in the Indian banking system, to name a few. These too could
contribute to a delay in the speed with which the economy can extract gains from the GST
regime. Any analysis of the impact of GST should therefore be suitably nuanced to take these
factors into account.

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9.4 – IMPACT OF GST ON RESTAURANTS.

The most awaited decision on the Goods and Services Tax regime has made its way in 4
different slabs. While India marches towards the global league of ‘one nation, one tax’ policy
by July 1st 2017, the government has made an attempt to subsume a web of local and central
levies into one single tax. Thus the GST council that is being headed by the State and Central
government has fixed rates for a host of goods and services, placing them under 5, 12, 18 and
28 percent.
The new GST rates, however is good news for restaurants with a yearly turnover of less than
Rs.50 lakh. According to the latest rates, small restaurants will be taxed at 5 percent and other
non-air conditioned restaurants will be taxed at 12 percent, while air conditioned restaurants
will be taxed at 18 percent. However liquor is exempt from the GST but VAT will be
applicable for restaurants serving liquor.
By talking about the impact of the new GST scheme on restaurants, as compared to the
previous GST scheme, now your restaurant bill will be less cluttered by the amount of
indirect taxes levied in the food bill and components like food costs, taxes on food, VAT and
cesses will be subsumed under one GST rate that goes by 7.2 percent on 40 percent of the
total food bill after adding service charge. Thus the new GST rates will reduce the taxes on
the food bill by approx 9.5 percent.
However this new scheme also comes with its share of advantages and disadvantages. The
GST Council finalized different GST rates for hotels and restaurants based on their tariffs and
turnover. Budget hotels will attract low or even nil taxes in the case of those charging less
than Rs.1000 a day for rooms, while those charging Rs.5000 and above for a day will have to
pay 28 percent tax. Thus even restaurants in such hotels will have to pay a tax of 28 percent,
upsetting many industry experts. President of National Restaurant Association of India
(NRAI) said that “The government has not realized the importance of providing impetus to
hospitality and tourism sectors, which are one of the highest employment generating sectors.”
Thus the 28 percent slab for restaurants in luxury hotels will directly affect its end customers.
Despite the disadvantages, the new GST rates will play a fundamental role in increasing
government revenue. As the GST network is designed to capture all transaction details, it will
lessen the amount of corruption. Thus with the reduction of a number of indirect taxes, the
cost of doing business, manufacturing cost of products and logistics will see a huge dip due to
less checks at state borders and no state taxes.
As per The NRAI’s (National Restaurant Association of India) the Current size of the
Indian food service industry is INR 247,680 crore and is projected to grow to INR 408,040
crore by 2018 at 11%. Post GST the Government has the opportunity to generate an
additional collection of INR 17,000 – 26,000 crore through closer monitoring of tax levy and
collection from the unorganized segment.
GST Council at its 14th meeting held on 19th May, 2017 at Srinagar, Jammu & Kashmir
approved the rates for services under four slabs – 5%, 12%, 18% and 28% as compared to the
current uniform 15% levy on all services which is subject to certain abatement and
exemption.

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In this article we have tried to put a detailed analysis of GST Rates for Hotels, Restaurants,
Catering, Supply of Foods/drinks and its impact on such industries and to the ultimate
consumers. Here are the highlights of new GST rates:
 Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 per
cent.
 Non-ac restaurants will have a 12% tax rate.
 AC restaurants will have to shell out 18% tax.
 Also five-star restaurants will have to submit a luxury tax of 28 percent.
 Hotels, lodges with tariffs less than Rs 1,000 will be taxed at 5%.
 Hotel lodges with tariffs between Rs 1,000- Rs 2,500 will be charged 12% tax
 Hotel lodges with tariffs between Rs 2,500- Rs 5,000 will be charged 18% tax
SUPPLY OF FOOD/DRINKS IN A RESTAURANT – GOODS OR SERVICES ?
It has been a debatable issue over the year that supply of food and drinks in a restaurant is
goods or services. Quite a lot clarification had been sought and even issued by the
Government from time to time to get the things clear but still the myth continues.
As per the Article 366 (29A) (f) of the Constitution of India supply of food and drinks in a
restaurant is considered as deemed sale of goods. But in Service Tax laws it is considered as
composite/bundled service which leads to levy of both Service Tax and State VAT.
The thing is quite clear in GST regime which specifically provides that supply of food and
drinks in a restaurant shall be treated as a supply of services. (Section 7(1)(d) read with
Schedule II of the Central Goods and Services Tax Act, 2017).
IMPACT ON CONSUMERS
For Restaurant, Under the current legislation, there is a composite levy of both Service
tax i.e 6%, as well as, Value Added Tax i.e 14.5% (Vary from State to State) on food and
beverages served by hotels and restaurants which finally put burden of 20.5% on the pocket
of ultimate consumers. However, some relief is there for Non-AC Restaurants supplying food
and beverages, there shall not be levy of service tax on these restaurants.
Post GST, the scenario shall be completely different. As already it is clarified under GST
Laws and discussed above that supply of food and drinks in a restaurant shall be treated as a
supply of services. Hence, only GST shall be levied on such services @ 18% which saves
around 3% as compared to above. But around 10% of extra burden on those people who love
dining out at luxury restaurants in 5 star or above rated Hotels as such restaurants are in 28%
tax bracket.
Further, as compared to earlier there is not any exemption for Non AC Restaurants and it has
to provide 12% tax, but still it is going to be a little bit cheaper or the situation may be the
same in few states which have 12% VAT rates as the element of VAT (vary from state to
state) shall not be there.
Further, staying in a good hotel is going to be very costlier as the rate of tax has been doubled
from 9% to 18%. Even Luxury Hotels of 5 star or above rated charging room rent Rs. 5,000/-
or above will attract 28% tax.

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IMPACT ON RESTAURANTS’ OWNER

The foremost and ultimate benefit for the Restaurants’ owners is that they are eligible to
adjust the output tax liability with the credit of input on goods consumed. Presently they are
following VAT Laws and Service Tax Laws and maintaining books and records, doing havoc
compliances under both the laws but post GST they will get few relaxation from these huge
task.
However, one biggest hurdle is still persisting for a restaurant’s owner who is supplying
Alcoholic Liquor as the Alcoholic Liquor for human consumption is out of the purview of
GST and existing state excise duty and VAT/CST will continue on these liquor which for
sure affects the seamless transfer of credits.
Moreover, A Restaurant with a turnover of less than Rs. 50 Lakh can opt for Composition
Scheme where there shall be levied a tax at the rate of 5% but they shall not be eligible to
collect taxes or claim Input Tax Credit
The slab rate for Hotels has been put 18% maximum in comparison of existing 9% (After
abatement) and 28% for luxury Hotels. Hotel Owners Association in Tamil Nadu demanded
to maintain a 5 per cent slab instead of the proposed maximum of 18 per cent during the GST
review meeting held on June 3 in Delhi.
Experts say that the proposed system and slab rate will not only affect the Hotels and
Restaurants Industry but also hospitality and tourism industry as well as employment
generation. Hope the Government will come out with some relief and exemption for Hotels
and Restaurants.
COMPARISON OF SERVICE TAX AND GST RATES FOR RESTAURANTS AND
HOTELS
SL List of Services Service GST

No. Tax Rates
Rates
1 Supply of Food/drinks in restaurant not having facility of Exempt 12%

air-conditioning or central heating at any time during the
year and not having licence to serve liquor.
2 Supply of Food/drinks in restaurant having licence to serve Exempt* 18%

liquor.
3 Supply of Food/drinks in restaurant having facility of air- 6% 18%

conditioning or central heating at any time during the year
4 Supply of Food/drinks in outdoor catering 9% 18%

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5 Bundled service by way of supply of food or any other 10.5% 18%

article of human consumption or any drink, in a premises
(including hotel, convention center, club, pandal, shamiana
or any other place, specially arranged for organizing a
function) together with renting of such premises
6 Supply of Food/drinks in air-conditioned restaurant in 5- 6% 28%

star or above rated Hotel.
7 Renting of hotels, inns, guest houses, clubs, campsites or 9% 12%

other commercial places meant for residential or lodging
purposes having room tariff Rs.1000 and above but less
than Rs.2500 per room per day
8 Renting of hotels, inns, guest houses, clubs, campsites or 9% 18%

other commercial places meant for residential or lodging
purposes where room tariff of Rs 2500/ and above but less
than Rs 5000/- per room per day
9 Accommodation in hotels including 5 star and above rated 9% 28%

hotels, inns, guest houses, clubs, campsites or other
commercial places meant for residential or lodging
purposes, where room rent is Rs 5000/- and above per
night per room
10 Services by a hotel, inn, guest house, club or campsite, by Exempt Exempt

whatever name called, for residential or lodging purposes,
having declared tariff of a unit of accommodation less than
one thousand rupees per day or equivalent;

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TYPE I HOTELS AND RESTAURANTS

A non A/C Restaurant famous for evening snacks, sweets and Tiffin items. They do have a
small eat out place under fan but do not have permit for serving liquors. Currently these
categories of restaurants which do not have AC in their hotels are exempted from Service tax.
Only VAT is applicable as per the state provisions of VAT.
GST Scenario
Option 1 - Regular scheme
Tax rate applicable under GST: 12 % (6% SGST + 6% CGST) to be charged additionally in
the bill. Suppose bill value is Rs 300 GST to be charged is Rs.36 total bill value will be
Rs336. Full Input tax Credit is available in respect of goods and services used for providing
output service.
Option 2 - Composition Scheme
Rate of tax applicable: 5% (2.5 % CGST + 2.5% SGST) no tax to be charged in bill to the
customer. Tax to be borne by the owner. For the same example as above tax to be paid by the
owner of the restaurant is 5% of the bill value i.e. Rs.15. total value of the bill to the customer
is only RS.300 as the owner cannot pass on the tax to the customer. No input tax credit is
available on the inputs and services used in providing output service.
TYPE II HOTELS
ABC is known for its mouthwatering dishes and thali items. The ground floor portion of the
restaurant is non a/c while in the top floor one can enjoy the tasteful dishes in a cool A/C
environment with dim lights and channel music. The aggregate turnover of the hotel is
around 1 crore during the last year. Shri X spends one evening with family in the first floor of
the hotel and got a bill of Rs 1000 exclusive of taxes.
Current Scenario
Currently such types of restaurants are required to pay service tax @6% after the abatement
of 60% and No Input Tax Credit is available there on. VAT is applicable as per the state
provisions of VAT.
GST Scenario
As per the decision of the GST council, Air-conditioned Restaurants and Restaurants with
license to serve liquor come under GST rate of 18%. A plain reading of this gives rise to two
types of interpretation as follows:
1. Since there are two distinct portions one with A/C and other without A/c, it is logical that
the customers who take services in the non A/c conditioned portion should not be charged
with the higher burden of tax and should be charged the same rate of tax as is applicable to
other non a/c restaurants . Thus those customers taking services at the non a/c portion would
be charged with tax rate of 12% while the take services at the top floor with a/c facilities
should be charged with the higher rate of tax of 18%.

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2. In contrast to the above presumption, earlier in the Service Tax regime, while non a/c
restaurants were exempted from payment of service tax, even if in any part of the restaurant if
centralized air conditioning or air heating facilities are present the restaurant comes under the
purview of service tax. On a similar footing even if air conditioning facilities are available in
one portion of the restaurant if the whole restaurant comes under the higher rate of taxation of
18% , then even those who take food in the non a/c environment have to shed tax at 18%.
This being the case in respect of majority of restaurants
This presumption is further supported by the fact that as per the GST council decision, air-
conditioned restaurants and restaurants with license to serve liquor come under GST rate of
18%. So even if it is a non a/c restaurant if they possess license to serve liquor, whether they
serve liquor or not the hotel comes under 18% tax rate. Thus even those persons who does not
take liquor and take only food has to pay tax at 18% just because the hotel is in possession of
license to serve liquor.
Taking this analogy, even if the ground floor is non a/c, since the first floor is air-conditioned
wherever one takes the services the tax rate to be charged would be 18%. While the
consumers have to shed 18% tax, the owner of the restaurant will be getting the relief of the
input tax credit on the inputs and services.
But if this presumption is correct most of the customers of even ordinary restaurants would
be severely affected.
TYPE III OUT DOOR CATERING SERVICES

A and Co. catering services provides out door catering services in Jaipur. Apart from
providing catering services for functions like marriages and other religious evens, they also
provide catering services to the employees of corporates in their offices and factories.
Current scenario
Currently Outdoor catering is taxed at 9% of Service tax (abated rate) and VAT as per
provisions of respective state VAT Act.
Scenario under GST

GST at the rate of 18% of the value of services provided with full input tax credit. However
since the inputs are mostly rice, grains etc which are zero rated, the availability of ITC does
not substantially help the outdoor catering service provider. Thus the outdoor catering
provider has to pay a GST of 18% (9% CGST +9%SGST) if it is intra state supply and 18%
IGST if it is inter-state supply.
TYPE IV HOTELS
Restaurants in 5 stars and above rated hotels XYZ with 5 Star rating they also have their
restaurant in the premises of the hotel.
Current scenario
Currently these types of restaurants are required to pay service tax @6% and No ITC is
available there on because of the availability of abated rate. VAT is applicable as per the state
provisions of VAT.
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GST Scenario
There is no possibility to think that, these restaurants would ever fall in the category of below
Rs 20 lakhs aggregate turn over in a financial year. Thus though the threshold limit is
available to these type of hotels as any other case, it is not operative in such cases. Similar is
the case with the composition scheme.
Thus these restaurants have to pay 28% GST (14% CGST and 14% SGST) on their intra state
supply of services and 28% IGST on their interstate supply of services.
Full Input tax Credit is available in respect of goods and services used for providing output
service.
HOTELS PROVIDING SHORT TERM ACCOMMODATION

SERVICES ALONG WITH SUPPLY OF FOOD TYPE I HOTELS
Lodging Houses
Budget hotels with room tariff of less than Rs. 1000. These category of hotels are exempted
from the payment of GST.
TYPE II HOTELS
This kind of hotels with room tariff ranging between Rs. 1000 and above but less than Rs
2500.
Current scenario
A hotel where the room tariff exceeds Rs. 1,000 is liable for service tax at 15 percent. An
abatement of 40% is allowed on the tariff value bringing the effective rate of service tax
down to 9%. The Value Added Tax 12 % to 14.5 % and luxury tax will still apply. Not input
service credit was allowed due to adoption of abated rates.
Scenario under GST

Such type of hotels attracts a GST of 12% (6% CGST +6%SGST) with full input service
credit. Thus even if we assume 12% VAT, then as against 21% tax paid earlier under the
GST regime these types of hotels end up in paying only 12 % GST with the benefit of input
tax credit also. This appears to be a cheerful situation for the owners of such hotels.
TYPE III HOTELS

Hotels with room tariff more than Rs 2500 but less than Rs. 5000.
Current scenario
Such hotels are liable for service tax at 15 percent. An abatement of 40% is allowed on the
tariff value bringing the effective rate of service tax down to 9%. The Value Added Tax 5%
to 14.5% and luxury tax will still apply. No input service credit was allowed due to adoption
of abated rates.
Scenario under GST

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Such hotels are liable for GST of 18% (9% CGST +9%SGST) as against the effective tax of
21% under the present indirect tax regime. Further the effective tax rate would further reduce
due to availability of input credit for the payment of tax. Thus GST is beneficial to owners of
such hotels as it reduces the overall tax burden and makes their services more competitive to
their next higher level service provider via five star hotels.
TYPE IV HOTELS
Hotels with room tariff exceeding Rs. 5000 per night per room.
Current scenario
Such hotels are liable for service tax at 15 percent. An abatement of 40% is allowed on the
tariff value bringing the effective rate of service tax down to 9%. The Value Added Tax 5.5
%to 14.5 % and luxury tax will still apply. No input service credit was allowed due to
adoption of abated rates.
Thus the effective rate of tax paid works out to 21% with the minimum VAT of 12%. Adding
luxury tax it would further go up.
Scenario under GST

Such hotels are liable for GST of 28% (14% CGST +14%SGST) as against the effective tax
of 21% under the present indirect tax regime. Adding the luxury tax component, the tax rates
before and after GST appears to be in the same range. Thus the owners of such hotels and
their customers have no impact on account of introduction of GST.
Positive impacts:-
1. One Nation, one tax policy will help to bring uniformity in the global league for the GST
regime.
2. Subsuming various taxes for one tax will help in easy billing for restaurants.
3. Reduction of taxes on food bill by approx. 9.5% will play a key role in attracting more
customers at the restaurants.
4. Small scale restaurant owners will benefit by minimum slab of 5-12% tax or no tax,
depending on the yearly turnover.
5. The new GST scheme will help in generating government revenue, reduce corruption and
reduce business costs for restaurants.
Negative impacts:-
1. The tax bracket for budget and luxury hotels is too wide.
2. Medium scale restaurants will be unnecessarily pulled into the tax slab of 28% tax in these
budget and luxury hotels.
3. This will affect the footfalls at such hotels, thus directly and indirectly affecting the
footfalls at the restaurants in such hotels.
The new GST scheme has been proposed to bring a positive change in the food and beverage
industry but only time will decide its impact on the industry.

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9.5- EMERGING CHALLENGES IN THE GST ON

RESTAURANTS.
1. Goods or services – conflict with Constitution Article: Article 366 (29A) (f) of
Constitution of India still exits which provides definition for levy of tax on sale or purchase
of goods on these activities whereas Schedule II of CGST Act provides such activity in the
nature of supply of services. There is view of some of the experts that the article in the
Constitution has been repealed by implication in view of the omission entry 54 in the
Constitution which now gives power to State Government to levy tax only on the specified
goods, however veracity of such view is questionable in as much as it is trite law that entries
in Seventh Schedule to the Constitution do not restrict the right of parliament/ state
legislature.
Whether schedule II is unconstitutional or not would get settled only at the Apex Court, not
before that. Issue pending before Supreme Court in case of Kerala Bar Hotel Association for
levy of service tax on restaurant services may have ramifications under GST also, if the Court
declares the valuation mechanism under service tax as constitutionally unacceptable.
2. Power to determine rate of tax with ITC condition– power under the law?: Restaurant
sector has been made liable to tax @ 5% without input tax credit by inserting entry in the rate
notification. Preamble to rate notification provides that the notification has been issued in
exercise of power conferred upon inter-alia by section 16 (1) of CGST Act. If one peruses
section 16 (1), it provides for availment of ITC on the supply used in the course or
furtherance of business. Restriction on availment of ITC through rate notification without
such provision under the law would create a dispute as to whether Government has power to
issue rate notification with conditions on ITC availment and on this ground, it could be
challenged in the Courts.
3. ITC denial – retrograde step: The concept of taxation without providing ITC is contrary
to the basic theme of the indirect taxation and statement of objects and reason for carrying out
Constitutional Amendment at the time of GST introduction which clearly provided that the
goods and services tax shall replace a number of indirect taxes being levied by the Union and
the State Governments and is intended to remove cascading effect of taxes and provide for a
common national market for goods and services. This indicates the backwardness in thought
process of revenue. Prescription of rate is an essential function of the Parliament, which could
not have been delegated to the Government without putting any controls/limits.
4. Meaning of restaurant – big dilemma:
The definition of restaurant has not been defined under the law and is subject to diverse
interpretation. Does it require seating and serving facility mandatorily or take away of the
food without having such facility would also get covered? Judgment of Honourable Supreme
Court in case of Northern India Caterers (India) Ltd. (1978) 42 STC 246, that facilities
provided in addition to the supply of food, furniture, furnishings, linen, crockery, cutlery,
music, area for floor dancing, floor show etc., are the facilities that takes serving of food
beyond just sale of goods (Food). The principle of the judgment could still be relevant under
GST.

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Perusal of definition of restaurant under dictionaries, Weekly Holidays Act or under Finance
Act 1994 or for that matter, licensing and registration guidelines under FSSAI Act indicates
that restaurants are places with reasonable infrastructure of serving the food. Take away
counters or parlors with no serving facility may still be out of the rate entry or for that matter,
out of Schedule II if item is not served “by way of” or “as part of” any service.
5. Taxability – qua establishment or qua supply?: All supplies made by restaurant are
deemed to be supply of services or it has to be determined based on case to case basis is
another open question and has been one of the hot topic raised before Advance Ruling
authority. To make it more complicated, one may find all type of possible conflicting
decisions of advance ruling authorities on the subject. In view of the author, it would not be
correct to say that once an establishment qualifies as restaurant etc., all supplies made by it
would get covered in the definition of services and hence liable to tax @ 5% (Sale of
chocolate, water bottles, cold drink at restaurant counter may not fall within supply of service
by any imagination). Each supply has to be determined on case to case basis. Underlying
criterion should be – whether supply of goods being food is by way of or part of any service –
if yes, it should be treated as supply of service. In all other cases, supply should be treated
supply of goods liable to tax as per applicable HSN of goods. Views of Appellate AAR in
case of M/s Kundan Misthan Bhandar 2019 appears to be correct position of law. GST
Council also acknowledged the proposition in 31st Thus, the classification and rate of tax has
to be determined qua supply not qua establishment. It is needless to say that the “supply as
goods” is always beneficial considering availability of ITC.
One need to consider various factors i.e. nature of infrastructure and facilities offered,
compulsory or optional self- services, take away or dining, home delivery, prepackaged items
or in-house manufactured, billing system, segregation of various supplies through various
modes. Decision as to nature of supply to be taken after evaluating impact of above in line
with the previous discussion.
6. Take away vs dining: Clarification Letter No. 332/82/97-TRU dated 24/09/1997 in the
context of outdoor catering services and in the context of Article 366 (29A) (f) had also
observed that, mere food delivery (or delivery at nominal cost to cover transport charges) of
food does not involve any service element and only constitute merely sale of food.
Considering the fact that Entry 6 (b) ibid and Article 366 (29A) (f) ibid are pari materia, the
clarification could still hold persuasive value under GST and could equally be applicable in
case of mere sale of food not “by way of” or “as part of” any service. Similar rationale also
pronounced in Circular No. F.No. 334/3/2011 dated 28/02/2011-TRU.
7. Centralised Kitchen concept– benefit arising from economy of scale marred by
increased cost due to GST:
The concept of centralized kitchen is widely prevalent wherein the semi cooked food/recipe
is prepared in the central kitchen and supplied to serving location in the different States. This
concept has gain more popularity due to associated benefits of economies of scale. Such
supply of semi cooked food could be said to be in the nature of supply of goods and subject
to GST with rate of tax applicable to such items. Classification of such items in semi
processed stage could become very difficult.

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Where such semi cooked items are supplied interstate, the recipient location may not avail the
credit of the same. This poses question as to the manner of determination of value of such
semi processed goods when supplied to distinct person especially considering the fact that
such items are not in the position of sale to independent customers and thus market value may
not be available. One might want to resort to valuation as per cost + 10%, however the
anomaly lies with the fact that cost method comes 3rd in the sequence of valuation method.
Unless the supplier could prove with tangible evidence that OMV of the supplies or value of
like and quality was not determinable, the revenue is bound to argue that cost valuation was
adopted in derogation of law.
Besides, even if one succeeds in adoption of costing method valuation, what elements to be
covered in the cost or not may also become a subject matter of litigation in future.
Many of the raw materials used for preparing such semi processed food are exempted and
thus supplying central kitchen may not have much ITC to avail. But when the semi processed
foods are supplied to other State, the tax has to be discharged at rate of tax as applicable for
classification of particular goods at transfer value. Further, when restaurant services are
provided to the customer by recipient State, again tax has to be charged without taking ITC
on interstate inward supply. This makes the business of having centralized kitchen less
lucrative. Job work model could possibly reduce the cost which could be looked into by such
businesses
8. Bigger restaurant chain – bigger problem of ITC attribution: In case of big chain
engaged in manufacturing of such items for serving in their restaurant viz a viz sale as
packaged food, the allocation of ITC between eligible and ineligible credit becomes very
difficult. One need to understand the relationship and difference between erstwhile Rule 6 of
CCR viz a viz Rule 42/43 of CGST Rules and the manner of application of rules under GST.
(i.e. whether rule has to be applied at store level, registration level or items level?). Further,
the assessee may not have option to forego mandate of Rule 42/43 when the legislator have
provided it to be applied in particular manner. Their own logic and convenience may be
rejected.
The Rule 42/43 compliance coupled with the ISD distribution could multiply the challenge of
the sector. Countless calculation, and
– A slight error in law [though correct on logic] could have revenue repercussions
– While, a slight error in logic [though correct on law] may result in foregoing of humungous
amount of ITC, which could have been availed by proper legal remedy
9. Cost optimization by restaurant: Considering that ITC may not be admissible, it become
imperative for the sector at consciously looking at cost to optimize the cost. Possible areas
which could be looked at may be lease arrangement with returnable deposit, branded disposal
material at concessional rates by brand owner, job work model, outdoor catering through
joint execution or so on. The planning should be within four corner of law to ensure that it
does not partake the tax evasion.
10. Sale through delivery partners – TCS compliance?: Sales are effected through
zomatto/swiggy etc. where such delivery partners are liable to deduct TCS on payment to be
made to the restaurant. Restaurants have to reconcile the receipts collected through such

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delivery partners and TCS deducted thereon. This has to be claimed as adjustment by the
restaurant in making payment of tax to the Government. Considering that the restaurants are
not entitled to claim ITC and in order to avoid the compliance burden on such non ITC
sector, it is suggested to do away the requirement of TCS deduction.
11. Non GST items with GST items: mixed or composite or something else? Many bars
and restaurants offer liquor along with the food. Charges for the liquor may be either be
subsumed in the price of products or charged separately from the customer. This also poses
challenge as to the taxability of liquor considering that it is subject to levy of state VAT.
Further, whether ITC required to be reversed proportionate to sale of liquor in case of
suppliers with ITC available with them also require proper evaluation.
12. Cross charge or ISD?: Ineligibility of ITC at recipient location poses a problem of
valuation of supplies of services between distinct persons. One need to understand the
relationship and differences between ISD and cross charge in order to have a proper
combination thereof aiming at reducing the cost.
13. Cost for wrong treatment of supplies having goods with compensation cess:
Compensation cess is applicable on the supply of some of the products (i.e. aerated water,
lemonade etc.). If the products are supplied as part of restaurant services, there may not be
any cess liability. However, if sold as supply of goods, the same would be subject to
compensation cess and corresponding ITC would be eligible. Any error in classification
under wrong nature of supply could cost substantially for the supplier.
14. Free supply during covid – whether GST? – Many restaurants providing free food
during covid. Restaurants with no ITC may not have implications in the absence of
consideration and hence not treated as supplies. But with restaurant with eligible ITC,
dilemma as to charge GST on free supplies at market value or reversal of ITC is another
challenge. Manner of giving away such items could have a bearing on the treatment.
Furthermore, free items food given to NGO etc with commercial mileage, GST treatment in
both the hand would be critical.
15. Restaurant within hotel – associates challenges:
Serving of complementary food: Restaurant may be located within the hotel premise. Food
may be served to the guest in the room where charges for such foods are recovered as part
and parcel of room rental. Once the tax is charged from the customer on room rental which
includes the value of supply of food also as composite supply, ITC of the same may be
allowed. Similarly, could be the case where complimentary breakfast is served along with the
stay. ITC of the same could be optimized.
Separate registration for restaurant – feasible?: It could be economical to have separate
registration for restaurant business and hotel. One needs to look at the feasibility of the same
especially in cases where both are located within the same premise considering amendment in
the law to provide for premise wise registration. It is further critical to determine meaning
and scope of “premise” considering that applicable rate of tax and ITC is linked to status of
supplier of services i.e. whether provided by suppliers providing “hotel accommodation” at
“specified premise”, or suppliers located in “specified premises”.

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Banquet service: Hotels and restaurants provide the services of composite supply of outdoor
catering together with renting of premises. By way of deeming fiction, such services have
been classified as outdoor catering service which is blocked u/s 17 (5). Recipients may be
availing such services in the course or furtherance of their business which is eligible for ITC
as banquet or convention service. The classification at the end of supplier should not
disentitle the ITC to the recipient, though, the amended category may create dispute between
business and department.
16. Supplies to SEZ:
Nature of supplies: Place of supply in such cases have been a matter of litigation. Some of
the advance rulings have held that these would be treated as intra state supply, liable to
CGST: SGST. Considering the damage which could have caused by such rulings,
Government clarified vide circular 48/22/2018 that such services to be treated as interstate
supply and liable to IGST.
Zero rating of supplies – restaurant vs outdoor catering: SEZ units may be availing
services of restaurant or outdoor catering for their employees. It becomes relevant to define
and distinguish between the two considering that outdoor catering is covered in the specified
list of services for authorized operation of SEZ and eligible for benefit of zero rating whereas
restaurant is not covered within such eligible list. Proper planning could reduce the cost
considering that such services are blocked for ITC u/s 17 (5). It would not be proper to take a
view that food provided to the employee of unit is not for authorized operation.
17. Canteen in school, colleges etc: Services provided by educational institution to its
student, faculty and staff is exempted from levy of GST. The canteen facility may be run by
educational institute itself or may be run through contractor on contractual basis. Circular 85
has clarified that when the services are provided by educational institution, it would be
exempted from GST whereas if it is provided by contractor to the students of educational
institute, it would be liable to tax @ 5%. It is worthwhile to note that if the prepackaged food
etc is supplied by education institution to its students, faculty and staff – it may not fall within
exemption. One also needs to understand and distinguish carefully between the term
‘catering’ referred to in s. no. 66 of exemption notification 12/2017 viz a viz term ‘outdoor
catering’ used in rate notification 11/2017 before claiming the exemption.
18. Serving of food in canteen of factory etc.: The supply of services in the canteen
operated in the factory premises fall within definition of restaurant services and thus liable to
GST @ 5%. Recoveries made by the companies from employees, whether full or partial,
could examine if it falls within the definition of wages as per labour laws and accordingly not
liable to GST under schedule III. One may evaluate the judgment of Telangana High Court in
case of Bhimas Hotels Pvt. Ltd and appropriately correlate it under GST law to claim the
benefit. If not treated as supplies, the factory would be entitled to claim ITC also wherever it
is mandatory to have such canteen as per any law for the time being in force. There may be
possible saving of 8-10% which could be sizeable for cost reduction.
19. Taxability of free food to drivers: – An informal arrangement between the restaurant
and bus drivers often exists, where the restaurant provides free food to drivers, if they stop
the bus loaded with passengers at their restaurant. At times, it appears that such supply of
food to drivers is without considerations and hence not leviable to tax, however the UK

35 | P a g e
Courts in multiple decisions have held that the transaction has the inherent consideration in
the form of driver’s act of stopping the bus, leading to increased customers. And therefore
holding that tax is leviable on food supplied free of cost to drivers. The food chains also need
to re-think their procedures on this aspect also.
20. Composition Scheme – really required for restaurant?: Supplier providing restaurant
services are entitled to opt for composition scheme. However, after amendment to 5%
without ITC, there is no benefit to continue in the composition scheme considering that the
tax may not be recovered from customer. Some of the restaurants in the industry are still
continuing with the composition scheme making their business less competitive. Perhaps, it is
time to discontinue the composition scheme for restaurant sector to reduce the confusion in
industry.
The open issues under GST for the restaurant sector has made it complicated and in
disadvantageous position especially after ITC restriction. There is need for Government to
relook at the decision of disallowing ITC with 5% rate of tax as it is clearly contrary to
principles of tax on value addition. Various issues discussed in the article should also be
addressed by CBIC so that the sector is not flooded with the undesirable litigation in future.
One may have to get the business practices independently examined to ensure that these are
in line with the law so as to avoid any potential litigation with department and at the same
time, to ensure that transactions are structured in the most cost effective manner.

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9.6 - CHANGES IN GST ON RESTAURANTS.

Original GST Rules for Restaurants
When GST first launched in July 2017, your restaurant could fall into three different rate
slabs. If you did not have air conditioning, you were charged 12%. If you had AC or a liquor
license, you had to pay 18% GST. For restaurants in five-star hotels, the GST rate was set at
28%. At that time, all restaurants in India could take advantage of the input tax credit. That
meant that when you paid GST while buying supplies for your restaurant, you could subtract
that amount from your tax bill. That helped reduce costs for many restaurants.
Updated GST Rules for Restaurants

In November of 2017, the GST council met and decided to make changes to the original
restaurant tax rates. During this meeting, the council set the GST rate at just 5% for most
restaurants, regardless of AC and liquor licenses. As of May 2018, the same applies to
takeaway and food delivery businesses.
If you run a restaurant in a hotel, however, the rules might be different. For restaurants in
hotels with standard room rates of RS7500 per night or higher, the GST is set at 18%. The
18% rate also applies to outdoor catering.
Input Tax Credit for Restaurants

The November 2017 GST changes also included a big shift in the ITC. If your restaurant falls
into the 5% GST slab, you can no longer claim the ITC on your monthly return. If you fall
into the 18% slab, you can still claim ITC.
The GST council decided to take away the ITC because they felt that restaurants were not
passing on the benefit to their diners — which would normally be done by lowering prices.
Since the goal of the GST regime is to reduce consumer prices, this was a problem for the
council. As a result, most restaurants in India enjoy a lower tax rate but no way to reduce
their monthly tax liability.

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CHAPTER:-10
CASE STUDY
Bharat Raj Punj Vs Commissioner of Central Goods And Service Tax (Rajasthan High
Court)
Case: Input tax credit availed fraudulently by issue of fake or fictitious sale invoices.
Decision: Arrested senior officials of the company after recording their statements. Also,
Rajasthan High Court dismissed the Writ petition of the petitioner and imposed a cost of Rs.
1,00,000/- only.
Comments: It is an offence committed under Section 132 of the Act. It specifically covers
cases leading to wrongful availment of Input tax credit. The Department has the power to
issue summons or arrest the offender on reasonable grounds, without first determining the
tax.
Optival Health Solutions Pvt Ltd Vs UOI (Calcutta High Court)
Case: Rectification or Revision of GST TRAN-2 form should be allowed or not.
Decision: Allowed petitioner to file a revised Form GST TRAN-2 either electronically or
manually.
Comments: Law permits a person to rectify or revise the Form , who voluntarily admits to
have made a mistake in the form or admits to have submitted detail that is not true. The tax
authorities have the right to retain original Form GST TRAN-2 for assessment purpose and
they may ask the petitioner to provide proper explanation for such revision/rectification.
Vikas Goel and another Vs Central Goods and Services Tax Commissioner ate (Punjab
and Haryana High Court)
Case: Bogus billing under GST.
Decision: Arrested the petitioner and denied their bail in GST fraud.
Comments: Petitioners made bogus bills and adjusted the amount without any actual
transportation or sale of goods. Transactions appeared only on paper. On search, it was found
that premises were closed for a period of 5 years and there was tax evasion.
So, the Department has the power to arrest under Section 69 of the Act.
Tvl. R K Motors Vs State Tax Officer (Madras High Court)
Case: Powers conferred on a statutory authority should be exercised in a reasonable manner.
Decision: Directed the authority to release the vehicle and goods detained.
Comments: Authority detained the vehicle, seized the goods when driver enrouted the
vehicle to some other place instead of the place of delivery. Also, asked for a huge penalty
for release of vehicle.

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Since the tax in respect of goods had already been paid and transportation was duly covered
by proper documentation, authority is wrong in taking such harsh steps. Instead, authority
should have asked the driver to reroute the vehicle to the place of delivery.
M/s. Jeyyam Global Foods (P) Ltd. Vs Union of India (Madras High Court)
Case: Detention of goods cannot extend beyond a reasonable period of time.
Decision: It is not open to the inspecting squad officers to detain goods beyond a reasonable
period of time and take action against it.
Comments: Inspecting Squad officer raised the issue of wrong classification of goods, issued
a detention notice and levied tax and penalty.
Squad officer can detain the goods only for the purpose of preparing relevant papers
regarding any issue involved like wrong classification of goods, and handover the papers to
the jurisdictional assessing officer. But , final action can be taken only by the jurisdictional
assessing officer.
M/s Sanjose Parish Hospital vs The Commercial Tax Officer
A three-judge bench of the Kerala High Court has held that the supply of medicines,
consumables, and implants provided by the hospitals to in-patients during the course of the
medical treatment is not subject to Value Added Tax ( VAT ) as same would constitute
‘composite supply.’
Citing Supreme Court judgment, the full Bench comprising Justice K Vinod Chandran,
Justice A Muhammed Mustaque and Justice Ashok Menon observed the sale, if any made, in
the course of the treatment of a patient in a hospital, is with the sole intention of curing the
patient.
Shafi Khan Khokhar vs State of Maharashtra
The Bombay High Court has allowed parallel Goods and Services Tax ( GST ) proceedings
in two states.
This petitioner has challenged an enquiry initiated by The Superintendent of CGST & Central
Excise (AE) Mumbai. The petitoner contended that he is already being subjected to enquiry
by CGST Authorities at Jaipur who have issued him a summons dated 7.9.2017. In the above
view, it is his contention that two parallel proceedings / enquiries under the same subject are
without jurisdiction. Thus, the enquiry by respondent No. 2 in Mumbai being later in point of
time be quashed.
Safari Retreats Private Limited vs Chief Commissioner of Central Goods and Service
Tax
The Odisha High Court, in a significant ruling, held that input tax credit is available in
respect of GST paid while constructing the immovable property intending to let out for rent.
The bench comprising Chief Justice K S Jhaveri and Justice K R Mohapatra has observed
that the very purpose of the Act is to make uniform provision for the levy, collection of tax,
the intrastate supply of goods and services, both Central or State and to prevent multi-
taxation.

39 | P a g e
M/s Atria Convergence Technologies vs. Union of India

The Karnataka High Court has directed the petitioner to approach the jurisdictional Nodal
Officer to revise the GST TRAN-1 for non-technical errors. The Court also directed the
Nodal Officer to consider the grievances of the petitioner within four weeks after providing
an opportunity of hearing to the petitioner.
M/s Megha Engineering & Infrastructures Ltd. vs The Commisioner of Central Tax
A two-judge bench of the Hyderabad High Court has held that the interest under section 50 of
the Central GST Act, 2017 is payable on the total tax liability including a portion of which is
liable to be set-off against the input tax credit.
Justice V. Ramasubramanian and Justice P Keshava Rao said that “the liability to pay interest
under Section 50 (1) is self-imposed and also automatic, without any determination by any
one. Hence, the stand taken by the department that the liability is compensatory in nature,
appears to be correct.”
M/s Jayyam Global Foods (P) Ltd vs Union of India
The Madras High Court has held that the Squad Officer cannot detain the goods and impose
the penalty for a bonafide misclassification under the Goods and Services Tax ( GST )
regime. Justice G R Swamynathan held that in such cases at best the inspecting authority can
alert the assessing authority to initiate the proceedings for assessment of any alleged sale, at
which the petitioner will have all his opportunities to put forward his pleas on law and on
fact.
India Logistics and Cargo Movers vs. State of Gujarat
The Gujarat High Court has quashed an order of detention of goods citing the Ground that it
is a Non-Speaking Order. The division bench comprising of Justice Harsha Devani and
Justice Sangeeta K. Vishen observed that, the department without applying his mind to the
facts of the case appears to have mechanically passed the impugned order without assigning
any reasons worth the name for confiscating the goods and conveyance.
Paresh Nathalan Chauhan vs. State of Gujarat
The Gujarat High Court has ordered an inquiry against Goods and Services Tax ( GST )
Department Officials illegally staying at the house of a taxable person without the authority
of law.
The division bench comprising of Justice Harsha Devani and Justice Sangeeta K. Vishen
observed that, “In exercise of powers under sub-section (2) of section 67 of the CGST Act, it
is not permissible for the authorised officer to use coercive measures against family members
to find out the whereabouts of the taxable person. It is shocking to see that in premises where
there are three ladies, namely, the petitioner’s mother, wife and young daughter, male officers
together with a CRPF Officer have stayed throughout day and night despite the fact that the
goods, articles and things were already seized on 11.10.2019. The entire exercise carried out
by the concerned officers from 12.10.2019 to 18.10.2019 was totally without any authority of
law and in flagrant disregard of the provisions of the Act and the rules and in total abuse of
the powers vested in them under the Act”.

40 | P a g e
CHAPTER:-11
CONCLUSION
Companies specializing in food and beverages operations could be the biggest
beneficiaries of GST within the hospitality sector. Food and beverages bills have multiple
components and can inflate the bills by 30-35%. A single-slab tax will benefit consumers
and should lead to savings of 10- 15% on the overall bill.
The restaurant industry has been burdened with high and multiple taxations. However,
liquor should be included in GST. Exempting it defeats the very purpose of bringing in a
uniform single tax structure. This allows states to have their own taxes without a cap with
separate accounting requirements and results in double compliance for the restaurant /
hotel industry. This is neither beneficial for 'Ease of doing business' nor for the
customers.
"Everybody likes consolidation of taxes as it leads to greater transparency and will help
guests and buyers understand overall costs. We welcome the development," said Raj
Rana, CEO, South Asia, for hotel group Carlson Rezidor. "Some states have luxury tax
and that impacts room rates. If India aspires to be competitive, then the tax structures too
need to be competitive.
"Luxury and other service taxes in hospitality amount to more than 22%, compared with
the proposed 18% under the GST regime. Overall, GST should be positive for the sector
assuming the multiplicity of taxes will go away in food and beverages.
The lacunas in the present regime of indirect taxation in India demands for the major
breakthrough in this field for facilitating the ease of doing business effectively and
efficiently. Hopefully, GST is going to be pinnacle which aims at evolving an efficient
and harmonized consumption or destination based tax system and will remove the
problems faced by the sector leading to cost optimization and free flow of transactions.

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BIBLIOGRAPHY / WEBIOGRAPHY.
 https://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)
 https://www.smbconnect.in/2017/Newsletter/July/Tax-System-India-Before-and-
After-GST.pdf
 https://quickbooks.intuit.com/in/resources/gst-center/gst-in-india/
 https://www.quora.com/Can-we-file-GST-returns-in-India
 https://taxguru.in/goods-and-service-tax/impact-gst-hotels-restaurants-supply-food-
drinks.html
 https://www.taxscan.in/gst-top-30-high-court-judgments-2019/41904/
 https://www.deskera.in/gst-benefits-and-impact-on-indian-economy/

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APPENDIX
Impact of GST on Restaurants.
Name
1. Age Group
 Below 18
 18-24
 25-35
 35 and Above
2. Gender
 Male
 Female
3. Income level
 100000-200000
 200000-350000
 350000-500000
4. Occupation
 Student
 Businessman
 Service
 Others
5. Do you use GST Portal?
 Yes
 No
6. How do you get know about GST?

From :
 Friend/Family
 Mass Media
 Online source
 Other : _______________

43 | P a g e
7. Do you think GST will burden the people/consumer?
 Yes
 No
8. Do you think implementing GST will cause higher price of goods & services?
 Yes
 No
9. Do you think after GST it is difficult to go restaurant for dinner?
 Yes
 No
10. Do you feel Increased GST has affected restaurants Business?
 Positively
 Negatively
 No impact
11. Do you think transition to GST Regime was?
 Smoother
 Difficult
 Very difficult
12. Do you feel GST Rates charges in restaurants should change?
 Yes
 No
13. How Impact of GST on Restaurants is?
 Positively
 Negatively
 No impact
14. Do you think that matching of ITC is useful to the taxpayers as it can avoid disputes
in future?
 Yes
 No

44 | P a g e
15. Do you feel, advance ruling mechanism under GST regime bring in friendly environment to
businesses?
 Yes
 No

45 | P a g e

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Prahladrai Dalmia Lions College Of Commerce & Ecomnomics.

Chapter Title Page

Impact of GST on Restaurant.

Central Government levied taxes on the following:

SHORTCOMINGS IN THE PRESENT STRUCTURE AND NEED OF GST

Post-GST Tax Structure in India

Impact of GST on Restaurant.

Impact of GST on Restaurant.

Impact of GST on Restaurant.

Impact of GST on Restaurant.

Impact of GST on Restaurant.

on the sale and purchase of securities. That continues to be governed by Securities

Impact of GST on Restaurant.

SWOT ANALYSIS ON GST

Strengths of Goods and Service Tax in India:

Weaknesses of GST system in India:

Impact of GST on Restaurant.

Very comfortable with the existing tax system.

Opportunities of GST in India:

Threats of GST in India:

Impact of GST on Restaurant.

ADVANTAGES AND DISADVANTAGES.

GST on service of Rs 50,000 @18% 9,000

Less: GST on office supplies (Rs 20,000*5%) 1,000

Net GST to pay 8,000

2. Higher threshold for registration

Let us look at this table below:

Impact of GST on Restaurant.

Tax Threshold Limits

Excise 1.5 crores

VAT 5 lakhs in most states

Service Tax 10 lakhs

GST 20 lakhs (10 lakhs for NE states)

3. Composition scheme for small businesses

Impact of GST on Restaurant.

6. Defined treatment for E-commerce operators

Impact of GST on Restaurant.

Impact of GST on Restaurant.

Impact of GST on Restaurant.

 Alcohol for human consumption (i.e., not for commercial use).

Impact of GST on Restaurant.

9.1 – GOODS AND SERVICES TAX NETWORK (GSTN)

Impact of GST on Restaurant.

9.2 - BENEFITS AND IMPACT OF GST TO THE INDIAN

Benefits of GST to the Indian Economy

How will GST impact the Indian Economy?

Impact of GST on Restaurant.

Impact of GST on Restaurant.

9.3 – EVOLUTION OF GOODS AND SERVICE TAX IN INDIA.

Impact of GST on Restaurant.

9.4 – IMPACT OF GST ON RESTAURANTS.

Impact of GST on Restaurant.

Impact of GST on Restaurant.

IMPACT ON RESTAURANTS’ OWNER

SL List of Services Service GST

1 Supply of Food/drinks in restaurant not having facility of Exempt 12%

2 Supply of Food/drinks in restaurant having licence to serve Exempt* 18%

3 Supply of Food/drinks in restaurant having facility of air- 6% 18%

4 Supply of Food/drinks in outdoor catering 9% 18%