Check any restaurant bill and there is a CGST and SGST line. Most people look at the total and leave. That gst on restaurant food figure is not a flat number. It depends on where the restaurant sits, whether it is inside a hotel, and that hotel’s room tariff. Post the September 2025 reform, GST on restaurant food is simpler, the 12% slab is gone, the AC distinction is removed, and most restaurants now charge a flat 5%.
| What | Details |
| Most Restaurants (Standalone) | 5% GST – no ITC |
| Hotel Restaurants (Room Tariff ₹7,500+) | 18% GST – ITC allowed |
| Outdoor Catering | 18% GST – ITC allowed |
| Online Delivery (Swiggy/Zomato) | 5%, collected and remitted by aggregator |
| Exempt Items | Fresh fruits, vegetables, milk, eggs, meat, Indian breads, UHT milk, pre-packaged paneer (from Sept 2025) |
| Sugary Sodas and Energy Drinks | 40% (new in 2025 reform) |
| Alcohol | Not under GST, state excise duty only |
| Service Charge | Not a tax, voluntary restaurant levy, customers can refuse |
| ITC Trade-off | 5% restaurants absorb input costs (ingredients, rent, utilities) into menu prices, no credit available |
| Bill Example | ₹800 bill at 5% = ₹40 GST / at 18% = ₹144 GST |
| Late Filing Penalty | ₹50/day + 18% interest |
Check your bill for GSTIN and correct rate, 18% on a standalone restaurant post-2025 is a red flag unless it is inside a premium hotel. Here is a guide helping you trace it in detail.
What is GST on Restaurant Food?
GST on restaurant food: The tax on food and beverage services. Introduced July 2017 to replace VAT and Service Tax.
The biggest change is in the 56th GST Council meeting, effective 22 September 2025. 12% slab removed, flat 5% for most restaurants, AC distinction gone.
How is GST Calculated for Restaurant Services?
Steps Involved in GST Calculation
1. Understanding the GST Rates for Different Food Items
Restaurant type determines the rate:
| Restaurant Category | GST Rate | ITC Allowed? |
| Standalone restaurants (most types) | 5% | No |
| Restaurants in hotels with room tariff below Rs. 7,500 | 5% | No |
| Restaurants in hotels with room tariff Rs. 7,500 or above (specified premises) | 18% | Yes |
| Outdoor catering services | 18% | Yes |
| Online food delivery (Swiggy, Zomato) | 5% | No (collected by aggregator) |
ITC restriction is the trade-off. 5% bracket: no credit on ingredients, rent, utilities, or packaging. Less paperwork, higher absorbed input costs.
2. Breakdown of Taxable vs Non-Taxable Items
- Prepared restaurant food: 5% or 18% depending on category.
- Packaged beverages: 18%.
- Fresh fruits, vegetables, milk, meat: exempt.
- From September 2025: Indian breads, UHT milk, pre-packaged paneer moved to NIL.
- Alcohol is not under GST rather it’s under the state excise duty only.
3. Calculation Example of GST on a Restaurant Bill
Bill: Rs. 800. At 5%: Rs. 40 GST (CGST Rs. 20, SGST Rs. 20). Total: Rs. 840.
Same bill at specified hotel premises (18%): Rs. 144 GST. Total: Rs. 944.
Service charge is separate and not included in a tax, or GST.
Why is GST Important for Restaurants?
- Before GST: VAT on food, service tax on services, sometimes central excise. Three calculations, two governments, one meal.
- GST: One rate, one return, one portal. The food gst percentage shows as a single line.
- 5% without ITC: Deliberate choice. Simpler for small restaurants, lower bills for customers, absorbed input taxes as the trade-off.
What are the GST Rates Applicable to Different Categories of Food?
Post-September 2025:
- 0%: Fresh fruits, vegetables, cereals, pulses, milk, eggs, fresh meat. Indian breads, UHT milk, pre-packaged paneer added in 2025.
- 5%: Restaurant meals (dine-in and takeaway), packaged bakery goods, dairy (cheese, butter, ghee), snacks, chocolate, pasta, noodles, sauces.
- 18%: Packaged beverages, specified premises hotel restaurants, outdoor catering.
- 40%: Sugary sodas and energy drinks (new in 2025 reform).
How Do Restaurants Manage GST Compliance?
Steps for Compliance
1. Maintaining Accurate Records
- Every invoice: GSTIN, HSN/SAC code, CGST/SGST split, total tax.
- Missing elements create GSTR mismatches.
- Separate records for taxable, exempt, and different rate categories.
2. Filing GST Returns
- Regular scheme: GSTR-1 and GSTR-3B monthly. Late: Rs. 50/day, 18% interest.
- Composition Scheme (below Rs. 1.5 crore): CMP-08 quarterly, GSTR-4 annually. Simpler but no ITC, no inter-state supply.
- 2025: multi-outlet chains must use mandatory ISD for shared service credits.
3. Dealing with Input Tax Credit (ITC)
5% bracket: No ITC including raw materials, packaging, rent, utilities absorbed without credit.
18% bracket (specified premises): Full ITC on inputs. Kitchen equipment, ingredients, services all eligible.
This is where 5% restaurants most often underestimate their effective tax burden.
How Does GST Impact Restaurant Pricing?
5% without ITC: Absorbed input costs appear in menu price, not the tax line. Invisible effect.
Pre-GST: 18-20% effective rates from combined VAT and service tax. 5% is visibly lower for customers. But base prices may have adjusted for absorbed inputs.
18% with ITC: Theoretically offsets some of the higher rate. Whether customers see it or the restaurant keeps it varies.
What are the Common Myths about GST on Restaurant Food?
Myth: AC restaurants pay more GST.
Fact: Not since 2025. AC distinction removed for standalone restaurants.
Myth: Service charge is a tax.
Fact: No, voluntary restaurant levy with no connection to GST, and customers can refuse.
Myth: Home delivery taxed differently.
Fact: All aggregators: 5%, same as dine-in, collected by the aggregator.
Myth: ITC benefits the customer. At 5%, no ITC.
Fact: The absorbed cost sits in menu prices.
How Can Digital Platforms Assist Restaurants in GST Management?
Billing software that auto-applies the correct rate, generates compliant invoices, and reconciles with GSTR-1 removes most manual error risk.
For multi-outlet chains: Platforms handling the mandatory ISD mechanism automatically.
For Composition Scheme restaurants: Basic software generating CMP-08 data is usually enough.
Conclusion
5% for most restaurants, 18% for specified hotel premises and catering. No ITC at 5%, full ITC at 18%. Service charge, and alcohol is not included in GST. 2025 reform removed the 12% slab and the AC distinction. Compliance now comes down to accurate rate application, timely GSTR filings, and understanding the ITC trade-off.
Frequently Asked Questions
What food items are exempt from GST in restaurants?
Fresh fruits, vegetables, cereals, pulses, milk, eggs, fresh meat and fish. From September 2025: Indian breads (roti, paratha, parotta), UHT milk, pre-packaged paneer added to the nil list.
How can customers verify if they are being charged the correct GST?
Bill must show GSTIN, rate (5% or 18%), and CGST/SGST split. Verify on the GST portal using the GSTIN. 18% for standalone restaurants post-2025 is suspicious unless it is a specified premises hotel.
What happens if a restaurant fails to comply with GST regulations?
Rs. 50 per day late fees, 18% interest, scrutiny notices, possible registration cancellation. Fraudulent ITC: Up to 100% penalty under Section 74 CGST Act.
Are takeaway orders subject to GST?
Yes. Same rate as dine-in: 5% or 18%. Whereas online delivery via aggregator: 5%, collected and remitted by the aggregator.
How can restaurants claim input tax credits?
Only 18% bracket restaurants (specified premises and catering). Standalone 5% restaurants cannot. Claim requires valid supplier invoices and GSTR-3B reconciliation against GSTR-2B.
What penalties can a restaurant incur for incorrect GST reporting?
Rs. 50 per day, 18% interest, demand for unpaid tax. Fraud or suppression: Up to 100% penalty. Wrong rate applied: demand notice with backdated interest.
How can digital accounting tools enhance GST management for restaurants?
Auto-invoicing with GSTIN and HSN codes, GSTR reconciliation, ITC tracking for 18% establishments, Composition Scheme return prep, and rate accuracy checks. Multi-outlet: automated ISD distribution.
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