Restaurant VAT Registration Mandatory, VAT + CST

[Sid E]

If the person says that his Profit is ₹ 5 Lakhs per year from Restaurant. Should the owner of the restaurant mandatorily requires to register for the commercial tax to get the Registration Certificate?

Posts / Replies

[YAGAY AND SUN]

Dear Sid E,

Criteria is Turnover but not the profit earned by you on the restaurant activities. Further, you have not disclosed the location from where are you operating in India. State VAT Law would be application for getting the registration under State VAT Laws read with CST Laws and Entry Tax Laws.

Regards,

YAGAY and SUN

(Business, Management & Indirect Tax Consultants)

[Sid E]

Thanks to YAGAY and SUN

The location is Tamil Nadu. I believe that Tamil Nadu VAT Act 2006.

I am not running the restaurant. The person who is running the restaurant, has given a written statement to Commercial Tax Officer that his profit for the last year is 5 Lakhs Rupees. Therefore, he is claiming that he is not required to register under TN VAT Act 2006.

In my view, based on the profit of rupees 5 Lakhs for the last one year, he should obtain Registration Certificate. I am trying to find out, how much minimum turn over would be for him based on his stated rupees 5 lakhs as a profit?

Any assistance would be much more appreciated.

[YAGAY AND SUN]

Rule 4 TNVAT Application for registration.- (1) Every dealer whose total turnover in respect of purchase and sale within the State in any year is not less than ten lakhs of rupees and every other dealer whose total turnover in a year is not less than five lakhs of rupees shall submit an application for registration under this Act to the registering authority in whose jurisdiction his principal place of business is situated, within thirty days from the date of commencement of the Act.

[Sid E]

Thanks.

Yes. You are right. That person is doing restaurant within the state. Therefore, I believe that the turn over should be 10 Lakhs to get registration.

I would like to discuss with you for this. What is the best number I can call you..

Section 38. Registration of Dealers.-- (1) (a) Every dealer, 1[*who purchases goods within the State and effects the sale of those goods within the State and whose total turnover] any year is not less than ten lakhs of rupees and every other dealer whose total turnover in a year is not less than five lakhs of rupees shall, and

(b) any other dealer or person intending to commence business may, get himself registered under this Act.

* By Section 7 of the Amendment Act (21 of ) 2007, with effect from 1st January 2007, the words ‘whose total turnover in respect of purchase and sale within the State’ were substituted by these words.

Also as per TN VAT Act 2006
Section 8 Payment of tax at compounded rate by hotels, restaurants, sweet-stalls and bakeries. - (1)(a) Notwithstanding anything contained in sub-section (1) of section 7, every dealer whose
total turnover is not less than rupees ten lakhs but not more than rupees fifty lakhs for the year on the sale of ready to eat unbranded foods including sweets, savouries, unbranded non-alcoholic
drinks and beverages served in or catered indoors or outdoors by hotels, restaurants, sweet-stalls,clubs, caterers and any other eating houses, may, at his option, instead of paying tax in accordance
with the provisions of clause (b) of sub-section (1) of section 7, pay tax at the rate specified in the Third Schedule.

Explanation.- For the purpose of computing the total turnover under this sub-section, the purchase turnover liable to tax under section 12 shall be added to the sales turnover.

[Sid E]

Dear Sirs

1) Are there any other way, would there be any possibility to find out or trace the average daily sales or daily sales of restaurant if the person does not submit the details to Tax office.

2) Are there any way, would there be any possibility to ask the Consumer Protection Officer about the average sales or sales of Food items per day for the restaurant if the person running the restaurant without any licences including the Non existences of Food Safety Licence, Trade licence, Health Licence, Fire NOC etc.

The intention of finding the sales is to find out the turn over of the restaurant.

Any suggestions / advise would be much appreciated.

[YAGAY AND SUN]

Get it audited from CAs or Cost Accountants as they are well versed in this matter.

[Sid E]

Many thanks for this. Much appreciated. I will do and come back if any requires.

[Sid E]

I have enquired an accountant at our city but he mentioned that he can't able to find Turnover based on the mentioned profit of 5 lakhs per year.

1) Is there anything I can find out the Town restaurants (perhaps our town may have 20 restaurants) last year percentage of profit from Commercial Tax office or Income Tax Officer? Not sure whether this information is available in Commercial Tax office or Income Tax office.

2) Also if the person declared statement that his profit is rupees five lakhs for the last year. I believe that he supposed to pay sales tax and income tax. Where can I find out this information for sales tax and income tax? Do you think that I can find out both from Commercial Sales Tax office or Income Tax Office?

3) Are we allowed to get these information using RTI?

Kindly explain this for me please.

[Ganeshan Kalyani]

The rule is simple if turnover is above the threshold limit then registration is required to be obtained. There is also a scheme called composition scheme, wherein dealer will have to pay a fixed %of turnover as tax.