Are restaurants right in charging you GST? How to find out if you are wrongly billed

Going out with family and friends is always fun. We eat and drink and enjoy the time spend together. We quickly pay our bills while bidding farewell but often tend to ignore the amount charged under Goods and Services Tax or GST. While it seems harmless, it is important to notice the tax component as all restaurants are not allowed to charge you GST. This is because of the Composition Levy Scheme, which means if a restaurant chooses to opt for this scheme, they are not allowed to collect GST from their customers. 

First things first. What is Composition Levy Scheme? The Composition Levy Scheme is a convenient compliance scheme that the taxpayers whose total turnover in the previous financial year does not exceed Rs 50 lakh may voluntarily opt for. By enrolling in this scheme, taxpayers agree to pay a fixed percentage of their annual turnover as tax to the government on a quarterly basis.

“In the context of restaurants, if a restaurant chooses to opt for this scheme, it will not be allowed to issue taxable invoices under the GST law and they cannot collect GST from their customers or claim Input Tax Credit on their purchases. To ensure that a consumer is not overcharged, the consumer should check whether the restaurant is registered under the Composition Levy Scheme on the GST portal under the 'Search GSTIN' tab,” said Sudin Sabnis, Partner, Nangia Andersen LLP. 

Recently, an enacted video went viral where a customer asks a restaurant person why he has charged GST on the food bill. The restaurant owner tells him it is mandatory but the aware customer clarifies to him the importance of the Composite Scheme.

“If the restaurant is registered as a regular taxpayer, then it is eligible to issue taxable invoices under GST law and collect GST. The Scheme is a great option for small businesses that want to reduce their compliance burden. At the same time, the consumers should be vigilant in order to avoid unjust enrichment at their cost,” said Sabnis.

Hence, next time you go to a restaurant do check whether they are even eligible to charge you GST. As someone rightly said, a penny saved is a penny earned. 

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