Complete guide on Restaurant & Registrations: Series I

The Complete Guide series has been started to enlighten budding entrepreneurs, startups, investors in relation on restaurant industry, towards the field of Accounts, Taxation and several inputs, recommendations, suggestions provided by some of the entrepreneurs in the said industry.

Our Team would be dedicated to providing data with respect to Registrations, Legal Process, Accounting (Basic), GST & Income Tax (In case if any specific changes in I.T. with respect to said business)

Every Month we would come up with a guide for professionals, entrepreneurs, investors and all interested parties with respect to different types of industries to ensure there is no misguidance or the good selves or not stuck with false rumors, misinterpretations, etc. In case you find anything incorrect updating in the post feel free to revert back in the comment section along with the basis.

With the evolution of E-Commerce and emergence of Swiggy, Dunzo, Zomato and various several organizations, it is seen that various entrepreneurs opt for starting a restaurant hence first part comes in with respect to registrations, hence a restaurant is required to take up following registrations

• FSSAI (Time Taken: Depends on Type of license preferred)
• Shop & Establishment Certificate (Gumasta License) (Max: 1 week)
• Trade License (Max: 2 weeks)
• GST (3 – 7 days)
• Liquor License
• VAT Registration
• FIRE LICENSE
• FSSAI (Food Safety & Standard Authority of India) (https://foodlicensing.fssai.gov.in/index.aspx)

Every Restaurant Owner irrespective of his organization size, nature and type of organization structure needs to obtain FSSAI License in order to commence his restaurant business, Further FSSAI Issues 3 kinds of licenses (Basic, State Central) now the question arises which one Is applicable for my business.

1. Basic License (Time taken: 15-30 days)

1. Annual Turnover < 12 Lakhs
2. Small Retailer dealing in food products
3. Food sale is done by the temporary stall holder
4. Individual who distributes food in any religious or social gathering except a caterer.
5. Small scale or cottage industries with some conditions (detailed schedule available in FSSAI Website)

2. State License (25-30 Working Days)

1. Any Person with Turnover of More than 12 Lakhs and upto
   • 30 Crores for Wholesaler
   • 20 Crores for Retailers, Distributors, Restaurants, Marketer
2. Dhaba, Food Caterers having turnover of more than 12 lakhs
3. 3- or 4-star hotels
4. Restaurants fulfilling some conditions as specified in fssai portal (Check website link)

3. Central License (Time Taken: 25-30 days)

1. Business having operations in more than one state
2. Turnover of more than
   • 30 Crores for Wholesaler
   • 20 Crores for Retailers, Distributors, Restaurants, Marketer
3. Importer
4. 5 Star or above Hotels
5. Vending agencies having more than 100 vending machines
6. Other conditions as specified by dept (check website link)

The Conditions mentioned above are exclusive which means if you are covered in any one you are required to take the license.

SHOP & ESTABLISHMENT CERTIFICATE (LABOUR LICENSE/GUMASTA LICENSE)

Shop & Establishment certificate is required for regulation of conditions of work and employment in Shop & Commercial Establishments, few states term it as Gumasta License & it is State-wise License.

Applicability and fee structure depends on state to state, and there would be basic compliances required such as Salary Register, Attendance Register etc which could be scrutinized by the respective officer.

TRADE LICENSE

Trade License again is State-wise License, every state has a schedule of activities that are mentioned in their municipal corporation Act, for example, Karnataka has Karnataka Municipal Corporation Act (Schedule X), Mumbai has Mumbai Municipal Corporation Act,1888 (Schedule M) etc.

This License is taken to regulate specific business to ensure that citizen is not adversely affected by Health, Hazard & Nuisance possible from the said activity carried out.

This license is 95-100% applicable in every state for Restaurant dealers.

Average Time Taken for registration under this license would be 2-3 Weeks.

GST (GOODS & SERVICES TAX)

Several Restaurants Nowadays face difficulty in GST Rates identification, and type of registration to opt for to make it simpler for them the following are the type of registrations available for restaurant dealers (HSN 9963)

Composition Registration

Restaurants can plan to take up Composition registration where there is a benefit of filing returns once in a quarter with less compliance burden however there are certain things to be kept in mind before you opt for this return.

1. Annual Aggregate Turnover Should not exceed 5 crores
2. Rate of GST applicable would be 5% (5% CGST & 2.5% SGST)
3. Display of words “Composition Taxable person, not eligible to collect tax on supplies”.
4. Display of “Composition Taxable Person” in every board
5. Can Provide other services to the extent of 5 lakh or 10% of turnover.
6. The dealer should not supply “GOODS” trough e-commerce operator (ex: Flipkart, Swiggy, Zomato etc) however restaurant business is classified as service and hence this makes it applicable to go with composition registration.

Regular Registration

GST Rate in case of regular Registration would be

• 5% - if the restaurant not attached to the hotel where room charges are 7,500 and above per day.
• 18% - if the restaurant attached to the hotel where declared room charges are 7,500 and above per day.
• 18%/5% - Outdoor Catering

LIQUOR LICENSE & RESPECTIVE REGISTRATIONS

Restaurants Dealing in Alcohol has to Procure Liquor License and also obtain State Excise & Vat Registration since Liquor is outside the purview of GST.

Liquor License is state-wise registration and hence It is advisable to check the availability, renewal cost etc before going for the same.

For update, in Karnataka no new license has been issued since 1992, hence all the entrepreneurs can do is purchase the license from the existing license holder or take it on a rental basis. The cost of renewals spike upto 2-3 lakhs.

ISSUES/ADVISORY/SUGGESTIONS REQUIRED

Who else can  provide the field issues better other than the member into it and hence our team had a brief discussion with Sir Rajkumar Poddar (Designated partner at Sikori Foods LLP, Bangalore) & Sir Lokesh Jain Dhanpatraj (Proprietor at SO FOODY) following are few Q & A ‘s which we taught to be addressed/to be asked to experts.

We Purchase Raw Materials and convert it into the finished product and serve to customers, hence our billing is of the finished product, for small vendors how do we account for the same in books of accounts according to the requirement of GST & Income Tax Laws?

According to Section 35 of CGST Act & Rule 56 of CGST Rules, Every Registered person is required to maintain books of accounts, with respect to stock of goods received such as opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the closing stock of raw materials, finished goods, scrap and wastage.

Everyday Restaurants generate various invoices on supply, are we required to maintain a copy of every invoice in physical mode?

No, The Laws of the land allows you to maintain the invoices in electronic mode as well, however the same has to be maintained, preserved as prescribed in the respective Laws/Act.

We Get associated with an E-Commerce Operator, and let’s say we supply F&B via ECO of say 100, E-Commerce Operator would charge his commission (10%), would deduct TCS (GST). How do we book the above in our records?

In case of supply you can provide the following

ECO A/c Dr 105
To Sale A/c 100
To Output CGST 2.5
To Output SGST 2.5

For Commission Charged
Commission A/c Dr (100*10%) =10
CGST EXPENSE A/c Dr 0.9
SGST EXPENSE A/c Dr 0.9
To Eco A/c 11.8

Note: The CGST Expense & SGST Expense is under Profit & Loss since input tax credit is not allowed against restaurant sale.

For TCS
Electronic Cash Ledger A/c Dr (2.5*1%) 0.05
To Eco A/c 0.05

We want to start a business where we make food at home kitchen and sell the same via ECO am I still liable to registrations?

As the law states any person into the food business needs to take FSSAI Registrations and Trade license if applicable at your state.

This was our first complete guide series on a specific industry, we look forward to comments, suggestions, recommendation and ideas on the next industry we should come up with.

The author can also be reached at cayashchopra@gmail.com.