Restaurant Services u/s 9(5)

The Government has notified “supply of restaurant services” under Section 9(5) wef January 1, 2022. This would mean that E-Commerce Operator (referred to as Food Tech Companies) will now be required to discharge GST on the restaurant services provided using the platform of Food Tech Companies.

Who gets covered and who does not?

A. Stand-Alone Restaurants / Cloud Kitchens

Service	Who pays Tax?
Serving Food	Food tech companies
Cakes and Pastries	Restaurant
Outdoor Catering	Restaurant

B. Restaurants forming part of anHotel providing accommodation services

Service	Who pays Tax?
Declared Tariff of any unit of Accommodation not exceeding Rs 7,500	Food Tech Company
​Declared Tariff of any unit of Accommodation exceeding Rs 7,500	Restaurant

C. Ice-Cream Parlour

​Service	Who pays Tax?
In–house preparation of Ice Cream	Food Tech Company
Trading of Ice Cream / Sundaes from Manufactured Ice Cream	Ice Cream Parlour

How will the invoicing work in cases where Food Tech Companies are required to discharge tax?

Restaurants may raise an invoice mentioning the value of food supplied and without levying any taxes. Restaurants are not required to raise the bill of supply since the services in question are not exempt under Section 11

The onus will be on the Food Tech Company to raise two invoices

Invoice 1 – Restaurant Services for the value of food supplied + GST payable at the rate of 5%

Invoice 2 – Delivery Charges of Food Tech Company + GST payable at the rate of 18%

Who will report the turnover of restaurant services in the GST Returns?

The Food Tech Companies will have to report the turnover of restaurant services in their returns in Form GSTR 1 as well as GSTR 3B

The turnover as per the financial statement of the restaurant will not match with the turnover reported in GST returns. How should the difference be explained?

It is suggested that the restaurant maintains different series of Invoices.

Series A – For Dine In / Take away which is not covered under Section 9(5)

Series B – For orders received through Food Tech Company 1.

Series C – For orders received through Food Tech Company 2.

Series B invoices to be reconciled with the statement received from Food Tech Company 1 and Series C invoices to match with the statement received from Food Tech Company 2 on a monthly basis

Is a cloud kitchen that exclusively supplies food through Food Tech Company, required to obtain GST registration / continue GST registration?

Effective January 1, 2022, the cloud kitchen is not liable to pay taxes and hence they are not required to obtain GST registration even if the services rendered by them crosses Rs 20 Lakhs. In case they are already registered, they can apply for cancellation of registration.

Is a Food Tech Company required to reverse credit on restaurant services turnover which is subject to 5% without ITC?

The Food Tech Company has been made liable to pay tax on the services rendered by restaurants. The Food Tech Company has neither incurred any expenses for rendering restaurant services nor availed any credits pertaining to restaurant services and hence the question of reversal of credit does not arise.

Is a Food Tech Company required to collect GST TCS u/s 52 of the CGST Act?

GST TCS is not required to be collected on supplies covered under Section 9(5) and hence the Food Tech Companies will not be required to collect taxes under Section 52 from the restaurants.

Is GST required to be paid on the share of discount borne by the Food Tech Company?

The Food Tech Company will have to add the discount funded by them to the discounted price of the restaurant service to arrive at the value of service for computation of tax payable