GST on Cloud Kitchens and Takeaway

Introduction

Cloud kitchens-also known as dark kitchens or central kitchens-are food establishments that cater exclusively to delivery or takeaway orders, with no dine-in service. Under GST laws, they are treated as providers of 'restaurant services', making them eligible for the GST Composition Scheme.

Eligibility Criteria for the Composition Scheme:- 

- Turnover Limit: Rs.1.5 crore (Rs.75 lakh for special category states)
- Supply Nature: Only food and non-alcoholic beverages
- No Alcohol: Alcoholic beverages not permitted
- No Inter-State Sales: Only intra-state supplies allowed
- No E-Commerce Platforms: Cannot operate through Zomato, Swiggy, etc.
- No Restricted Manufacturing: Must not produce ice cream, pan masala, or tobacco

Tax Rate and Compliance Requirements:- 

- GST Rate: 5% (2.5% CGST + 2.5% SGST) on turnover
- Billing: Use 'Bill of Supply' stating: 'Composition Taxable Person, not eligible to collect tax on supplies.'
- Input Tax Credit (ITC): Not allowed
- Return Filing: File Form GSTR-4 quarterly by the 18th of the month following the quarter

Disqualifications from the Scheme :-

- Exceeding turnover limits
- Manufacturing restricted goods like ice cream or pan masala
Practical Considerations
- Simplified Compliance: Reduces paperwork
- Cost Implications: No ITC may increase input costs
- Business Suitability: Ideal for smaller, intra-state cloud kitchens


Conclusion :- 

 
The GST Composition Scheme offers cloud kitchens a streamlined tax option.
However, eligibility rules and the impact of losing input tax credits must be carefully weighed to ensure this path aligns with the business
model.

 

GST on Cloud Kitchens and Takeaway
A Guide by KAPG & Associates