Cloud kitchens, ghost kitchens, or virtual kitchens – all thriving in India – operate without physical dining spaces, serving online food orders exclusively. Understanding taxation is crucial for compliance and financial efficiency.
Cloud kitchens earning over ₹20 lakh annually must register for GST, with the threshold at ₹10 lakh for northeastern states. Upon registration, they should apply GST, ranging between 5% and 18%, based on the food type. Proper item classification is vital for accurate tax rate application.
Cloud kitchen profits are taxable as business income under the Income Tax Act of 1961. Tax rates vary based on business entity type: Sole proprietorships and partnerships follow individual income rates, whereas private limited companies are subject to corporate rates. Deductions, including 80C and 80D for investments and insurance premiums, can be claimed by cloud kitchens.
Cloud kitchens must deduct TDS on payments to vendors or service providers exceeding certain limits. For instance, payments over ₹30,000 annually to rent providers or exceeding ₹100,000 in professional fees require TDS deductions under Sections 194I and 194J. Non-compliance with TDS deposit and filing can result in issues.
Cloud kitchens with GST registration can claim Input Tax Credit for GST paid on goods, including raw materials, packaging materials, and services like delivery platforms. Ensure thorough invoice documentation and GST filing reconciliation for effective ITC claims.
To stay compliant, file income tax by July 31 yearly for individuals and by September 30 for companies. Also, submit monthly or quarterly GST returns based on turnover and chosen scheme. Use a compliance calendar to prevent penalties and maintain smooth operations. Take action now!
Sources News From Various Digital Platforms, Websites, Journalists, And Agencies.
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