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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.
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.
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.
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.
Post-September 2025:
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.
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.
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.
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.
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.
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.
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.
Rs. 50 per day late fees, 18% interest, scrutiny notices, possible registration cancellation. Fraudulent ITC: Up to 100% penalty under Section 74 CGST Act.
Yes. Same rate as dine-in: 5% or 18%. Whereas online delivery via aggregator: 5%, collected and remitted by the aggregator.
Only 18% bracket restaurants (specified premises and catering). Standalone 5% restaurants cannot. Claim requires valid supplier invoices and GSTR-3B reconciliation against GSTR-2B.
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.
Yes. Menu prices are set by the restaurant. Most build the input tax absorption cost into base prices. GST itself is collected from the customer and remitted: It is not a restaurant cost in isolation.
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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