GST registration for restaurants operating exclusively though E-commerce operators w.e.f. 1st January 2022

Whether restaurants/cloud kitchen/central kitchen providing restaurant services exclusively through E-commerce operators (ECO) would be liable for obtaining or continuing registration w.e.f. 01-01-2022

To get answer for this question we need to revisit section 22 and section 23 of CGST Act, 2017 along with Notification No. 65/2017 - Central Tax Dated: 15th November, 2017.

1. Section 22 of CGST Act makes registration obligatory for persons making taxable supply from any state or UT if aggregate turnover exceeds 20 lacs/10 lacs as the case may be.

2. Section 23 of CGST Act grants exemption from registration if person is engaged exclusively in supplies not liable to tax(petroleum products and alcoholic liquor) or supplies wholly exempted from tax (nil rated supplies or supplies exempted u/s 11)

3. Here it should be kept in mind that restaurants/cloud kitchens providing restaurant services through ECO are neither providing supplies not liable to tax nor providing supplies wholly exempted from tax hence they are not covered by section 23 (1).

4. Beside this section 23 empowers Government to issue notifications for granting exemption from registration.

5. Gist of some notifications issued u/s 23 is as follows:

• Persons exclusively providing supplies liable for reverse charge u/s 9(3) are exempted from obtaining registration.
• Persons engaged exclusively in providing services through e-commerce operators who are liable for collection tax on such services u/s 52 are exempted from obtaining registration provided aggregate turnover does not exceed 20 lacs/10 lacs and services are not notified u/s 9(5).

This notification is issued to grant relief to service providers from the requirement of compulsory registration u/s 24 of CGST Act i.e. where any person make any supply (other than services notified u/s 9(5) ) through e-commerce operator who is liable u/s 52 for TCS on such supply.

Here again it is clear that restaurants/cloud kitchen under consideration are not covered by this notification also since their services are notified u/s 9(5) and the e-commerce operator is not liable for TCS in this regard.

Conclusion is that even though restaurant services are covered by section 9(5), ECO will be paying tax on these services, still, restaurant/ kitchens providing such services will be liable to obtain/ continue to retain their registration so long they are covered by section 22 and so long no notification specifically exempting them is issued under section 23.