GST on Restaurants in India: Complete Tax Guide for Food Business (2026)

1. Understanding GST for Restaurants

The Goods and Services Tax (GST) was introduced in India on July 1, 2017, replacing a complex web of indirect taxes including VAT (Value Added Tax), Service Tax, Central Excise Duty, and various state-level levies. Before GST, a restaurant bill in India could include both VAT (typically 12.5-14.5%) and Service Tax (5.6-6%), leading to confusion for both business owners and customers.

Under the GST regime, restaurants pay a single, unified tax that subsumes all these earlier taxes. This simplification has been a major relief for food business owners who previously had to navigate different tax structures across states. However, GST for restaurants is not a flat rate — it varies based on the type of establishment, whether you have air conditioning, whether you operate within a hotel, and the nature of your food service.

The GST Council, headed by the Union Finance Minister, periodically revises rates and rules for the restaurant sector. The most significant change came in November 2019, when the GST rate for all restaurants (both AC and non-AC) was unified at 5% without Input Tax Credit (ITC). Before this change, AC restaurants were charged 18% GST with ITC, which led to complex calculations and disputes.

For restaurant owners, the most important thing to understand is that GST is a destination-based consumption tax. This means the tax is collected at the point of sale (your restaurant) and shared between the Central Government (CGST) and your State Government (SGST). For example, when you charge 5% GST on a food bill, it is split as 2.5% CGST and 2.5% SGST.

2. GST Rates for Different Restaurant Types

One of the most common sources of confusion for food business owners is the different GST rates that apply to different types of restaurants and food services. The rate you charge depends on your restaurant category, the nature of your service, and whether you are part of a hotel.

5% GST Without ITC (Most Common)

The vast majority of restaurants in India — including non-AC restaurants, AC restaurants, cafes, bakeries, sweet shops, fast food outlets, QSRs (Quick Service Restaurants), cloud kitchens, and takeaway counters — fall under the 5% GST rate without Input Tax Credit. This rate applies uniformly regardless of whether the restaurant is air-conditioned or not, a change made effective from November 2019 that simplified the tax structure significantly.

The 5% rate is split as 2.5% CGST and 2.5% SGST. On a food bill of Rs 1,000, the GST would be Rs 50, making the total Rs 1,050. The trade-off is that restaurants under this rate cannot claim ITC on their input purchases (raw materials, rent, equipment, etc.).

18% GST With ITC (Outdoor Catering & Premium Hotels)

Outdoor catering services — where food is prepared and served at a venue outside the restaurant (such as weddings, corporate events, and parties) — attract 18% GST. The advantage here is that caterers can claim Input Tax Credit on their purchases, which can substantially offset the higher tax rate. Restaurants located inside hotels where the room tariff exceeds Rs 7,500 per night also fall under the 18% GST bracket with ITC benefits.

Food Delivery Apps: Zomato & Swiggy

Since January 1, 2022, food delivery platforms like Zomato and Swiggy are responsible for collecting and remitting 5% GST on all food orders delivered through their platforms. This means the restaurant does not need to separately charge GST on delivery orders — the platform handles it. However, restaurants must still account for these transactions in their GST returns and ensure proper reconciliation.

Composition Scheme: For Small Restaurants

Small restaurants with annual turnover up to Rs 1.5 crore can opt for the Composition Scheme, which allows them to pay GST at a flat rate of 5% (effectively 1% for manufacturers, but restaurants fall under the 5% restaurant service rate). Composition dealers file simplified quarterly returns instead of monthly returns, but they cannot collect GST from customers separately on the invoice, cannot claim ITC, and cannot do inter-state business.

3. GST Registration Process for Restaurants

GST registration is mandatory for restaurants whose annual aggregate turnover exceeds the prescribed threshold. Understanding whether you need to register — and how to do it correctly — is the first step toward GST compliance.

Who Must Register for GST?

• Turnover exceeds Rs 20 lakh: Mandatory registration for restaurants in most Indian states
• Turnover exceeds Rs 10 lakh: Mandatory for restaurants in special category states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Himachal Pradesh, Uttarakhand)
• Inter-state supply: If you supply food or catering services across state borders, registration is mandatory regardless of turnover
• E-commerce operators: If you sell through Zomato, Swiggy, or any online platform, registration is mandatory regardless of turnover

Documents Required for GST Registration

• PAN Card: Of the proprietor, partner, or company
• Aadhaar Card: For identity verification and Aadhaar authentication
• Business Address Proof: Electricity bill, rent agreement, or property tax receipt of the restaurant premises
• Bank Account Details: Cancelled cheque or bank statement of the business account
• Photographs: Passport-size photos of the proprietor/partners/directors
• Business Registration: Partnership deed, Certificate of Incorporation, or Shop Act license
• Authorization Letter: If applying through an authorized signatory

Online Registration Steps

GST registration is done entirely online through the GST portal (gst.gov.in). The process typically takes 3-7 working days. Here are the steps:

1. Visit gst.gov.in and click on "Register Now" under the Taxpayers section
2. Fill Part A: Enter your PAN, mobile number, and email address. You will receive OTPs on both for verification
3. Fill Part B: Using the Temporary Reference Number (TRN) received, complete the detailed application with business details, promoter/partner information, and authorized signatory details
4. Upload Documents: Attach all required documents in the prescribed format (JPEG/PDF, file size limits apply)
5. Verification: Submit the application using DSC (Digital Signature Certificate), EVC (Electronic Verification Code), or e-Sign (Aadhaar-based)
6. ARN Generated: An Application Reference Number is generated for tracking
7. GSTIN Issued: Upon approval, your 15-digit GSTIN is issued within 3-7 working days

Once registered, you must display your GSTIN prominently at your restaurant premises and on all invoices. For a complete guide on all licenses needed to run a restaurant, read our FSSAI License for Restaurants: Complete Guide.

4. Input Tax Credit (ITC) Rules for Restaurants

Input Tax Credit is one of the most misunderstood aspects of GST for restaurant owners. ITC allows businesses to reduce their GST liability by claiming credit for the GST already paid on their business purchases (inputs). However, the availability of ITC depends entirely on the GST rate your restaurant charges.

Who Can Claim ITC?

Only restaurants and food service providers charging 18% GST can claim Input Tax Credit. This includes:

• Outdoor catering services charging 18% GST
• Restaurants in starred hotels with room tariff exceeding Rs 7,500 per night

Who Cannot Claim ITC?

Restaurants charging 5% GST — which includes the vast majority of restaurants in India — are explicitly barred from claiming ITC. This means if you run a regular restaurant (AC or non-AC), you cannot set off the GST paid on your raw material purchases, rent, equipment, or other business expenses against your GST output liability.

The 5% vs 18% Dilemma

Many restaurant owners wonder whether they would be better off under the 18% rate (with ITC) or the 5% rate (without ITC). For most standalone restaurants, the 5% rate works out cheaper for the customer and simpler for the business. However, for outdoor catering businesses with significant input costs (tent and decor rentals, crockery, transport, staff), the 18% rate with ITC can actually result in a lower effective tax burden.

Use DineOpen's GST Calculator to compare the effective tax impact under both rates for your specific business scenario.

5. GST Returns and Compliance for Restaurants

Filing GST returns on time is not optional — it is a legal requirement that carries penalties for non-compliance. Restaurant owners must file multiple returns throughout the year, depending on their registration type (regular or composition).

Returns for Regular Taxpayers

• GSTR-1 (Outward Supplies): Details of all sales invoices issued during the period. Due by the 11th of the following month (monthly filers) or the 13th of the month after the quarter ends (quarterly filers under QRMP scheme). Businesses with turnover up to Rs 5 crore can opt for quarterly filing.
• GSTR-3B (Summary Return): Summary of outward and inward supplies, tax liability, and ITC claimed. Due by the 20th of the following month. This is the return where you actually pay your GST liability.
• GSTR-9 (Annual Return): Consolidated annual return summarizing all monthly/quarterly returns. Due by December 31st of the following financial year. Mandatory for businesses with turnover above Rs 2 crore.

Returns for Composition Taxpayers

• CMP-08 (Quarterly Statement): Simple quarterly statement of self-assessed tax. Due by the 18th of the month following the quarter.
• GSTR-4 (Annual Return): Annual return for composition taxpayers. Due by April 30th of the following financial year.

Key Compliance Tips for Restaurant Owners

• Maintain digital records: Keep all purchase invoices, sales records, and expense bills organized digitally. The GST department can request records for up to 6 years.
• Reconcile monthly: Match your sales data with GSTR-1 and bank statements every month to catch discrepancies early.
• Use HSN codes correctly: Restaurant services fall under SAC code 9963. Takeaway food items have separate HSN codes (e.g., 2106 for food preparations). Using the wrong code can trigger notices.
• E-invoicing: Businesses with turnover above Rs 5 crore must generate e-invoices through the IRP (Invoice Registration Portal). This threshold may be lowered further.
• Keep supplier GST details updated: Ensure all your suppliers are GST-registered and their details are correctly captured in your purchase records.

For strategies to manage your restaurant costs effectively alongside tax compliance, read our guide on How to Reduce Restaurant Operating Costs.

6. How DineOpen Simplifies GST Compliance

Managing GST manually — tracking invoices, calculating tax, filing returns, and maintaining records — is time-consuming and error-prone, especially for busy restaurant owners who are focused on food and service. DineOpen's billing and invoicing system is purpose-built for Indian food businesses to automate GST compliance from day one.

Automatic GST Calculation on Every Bill

DineOpen automatically applies the correct GST rate (5%, 12%, or 18%) based on your restaurant type and menu configuration. Every bill generated includes the proper CGST and SGST (or IGST) breakup, your GSTIN, HSN/SAC codes, and all mandatory invoice fields required under GST law. No manual calculation, no errors.

GST-Compliant Invoice Generation

Every invoice generated through DineOpen meets the GST invoice format requirements — including supplier and recipient GSTIN, invoice serial number, HSN/SAC codes, taxable value, tax rate, and tax amount. You can generate both tax invoices and bill of supply (for composition dealers) with a single click.

GSTR-1 Data Export

At the end of every month (or quarter), DineOpen generates a ready-to-upload GSTR-1 report with all your outward supply details formatted exactly as required by the GST portal. Simply download the file and upload it to gst.gov.in — saving you hours of manual data entry and reducing filing errors.

HSN Code Management

DineOpen maintains a comprehensive database of HSN and SAC codes relevant to the food and restaurant industry. When you add menu items, the system automatically suggests the correct HSN/SAC code, ensuring every invoice is compliant. This is especially important for restaurants that sell both prepared food (SAC 9963) and packaged items (various HSN codes).

Digital Record Keeping

All invoices, purchase records, and tax reports are stored digitally in DineOpen's secure cloud system. You can access records from any device, search by date range, customer, or invoice number, and retrieve data instantly if the GST department requests it during an audit. Under GST law, businesses must maintain records for 72 months (6 years) — DineOpen handles this automatically.

Ready to streamline your restaurant operations beyond just GST? Explore our complete restaurant management platform at DineOpen for Restaurants, or learn more about starting a food business with our How to Open a Restaurant in India (2026) guide.