Introduction
Goods and Services Tax (GST) has significantly impacted various industries in India, including the catering business. Whether for weddings, corporate events, or small gatherings, catering services play a vital role in providing food and beverages to customers. However, the taxation of catering services under GST is often misunderstood.
In this article, we will explore the GST on catering services, including applicable tax rates, Input Tax Credit (ITC) provisions, compliance requirements, and exemptions. By the end, businesses and customers will have a clear understanding of how GST applies to catering services in India.
Understanding Catering Services Under GST
Catering services involve preparing, supplying, and serving food and beverages for functions, corporate events, weddings, and social gatherings. Under GST law, catering services fall under the category of restaurant and outdoor catering services, attracting specific tax rates and conditions.
The government classifies catering services separately from regular restaurant services, considering factors like the nature of food supply, serving at a designated venue, and additional services like decoration and staffing.
GST Rate on Catering Services
The GST rate on catering services depends on various factors, including the type of service provider and the location of service.
1. GST Rate for Normal Catering Services
- The GST rate applicable to catering services (including event-based catering) is 18%.
- This includes both food and beverage supply when provided as part of a catering service.
- The tax is charged on the total bill amount.
2. GST Rate for Outdoor Catering (Without ITC Option)
- If an outdoor caterer opts for the Composition Scheme, the GST rate is 5%.
- However, in this case, the Input Tax Credit (ITC) is not available.
- This scheme is beneficial for small catering businesses looking for simplified tax compliance.
3. GST Rate for Catering in Hotels or Clubs
- If catering services are provided inside a hotel, banquet hall, or club, the GST rate remains 18%.
- If the hotel has a declared room tariff of ₹7,500 or more, the applicable GST rate on catering services rises to 28%.
| Type of Catering Service | GST Rate |
|---|---|
| Normal catering services | 18% |
| Outdoor catering (Composition Scheme) | 5% (No ITC) |
| Catering inside hotels (Tariff < ₹7,500) | 18% |
| Catering inside hotels (Tariff ≥ ₹7,500) | 28% |
Input Tax Credit (ITC) for Catering Businesses
Input Tax Credit (ITC) is a significant benefit under GST that allows businesses to claim tax paid on purchases against their GST liability. However, ITC on catering services is subject to restrictions.
1. ITC for Catering Businesses
- Businesses engaged in catering services can claim ITC on input costs such as raw materials, rent, and other operational expenses.
- ITC can be availed only when catering services are supplied to another registered business.
- If a catering business opts for the Composition Scheme (5% GST), ITC cannot be claimed.
2. ITC Restrictions for Businesses Availing Catering Services
- Under Section 17(5) of the CGST Act, businesses cannot claim ITC on food, beverages, and catering expenses unless they are providing catering as an output service.
- Example: If a company avails catering services for a corporate event, they cannot claim ITC on the catering invoice.
GST Compliance for Catering Businesses
Catering service providers must follow GST compliance regulations, including:
1. GST Registration Requirements
- Businesses providing catering services with an annual turnover above ₹20 lakh (₹10 lakh in special category states) must register under GST.
- Voluntary registration is advisable for small catering businesses to expand their client base.
2. GST Invoicing for Catering Services
A tax invoice issued for catering services must include:
- GSTIN of the supplier and recipient (if applicable)
- Invoice date and number
- Description of catering services
- Taxable value and applicable GST rate
- Total amount including GST
3. GST Returns Filing
- Catering businesses must file regular GST returns:
- GSTR-1 (outward supplies)
- GSTR-3B (summary return)
- GSTR-9 (annual return)
- Businesses under the Composition Scheme must file GSTR-4.
GST Exemptions for Catering Services
While catering services are generally taxable, there are specific cases where exemptions apply:
1. Catering Services in Educational Institutions
- GST is not applicable when catering services are provided to:
- Schools, colleges, or universities providing education up to higher secondary level.
- Hostels affiliated with educational institutions.
2. Non-Profit Organizations and Government Institutions
- Catering services provided for charitable or religious functions may be exempt from GST, depending on the nature of the event.
- Catering provided to government-run welfare programs is also exempt in some cases.
Impact of GST on Catering Businesses
GST has both positive and negative implications for catering service providers:
Benefits:
Standardized Taxation – Uniform 18% GST rate simplifies tax calculations.
Elimination of Multiple Taxes – No VAT or service tax confusion.
Claiming ITC – Registered catering businesses can offset input costs.
Challenges:
Higher Tax Burden – Earlier, service tax on catering was 15%; now it is 18%.
ITC Restrictions for Clients – Businesses availing catering services cannot claim ITC.
Complex Compliance – Monthly GST returns increase administrative work.
Conclusion
GST on catering services is levied at 18% for most businesses, with some exemptions and a 5% Composition Scheme for small caterers. While Input Tax Credit is available for catering businesses, clients availing catering services cannot claim ITC under Section 17(5).
Catering businesses must ensure proper GST registration, invoicing, and return filing to remain compliant. Understanding GST rates, ITC provisions, and exemptions can help catering service providers optimize costs and offer competitive pricing.
For catering businesses, staying updated with GST rules ensures smooth operations, compliance, and financial efficiency.
To Read more such articles, visit us at: https://vibrantfinserv.com/kb/
For more info on GST, visit: https://gst.gov.in/
