If you run a restaurant, cloud kitchen, or food delivery outlet in India, one of the most important aspects of running a compliant business is understanding the GST rate on restaurant food. From billing to pricing to filing returns, GST affects every part of your restaurant’s operations. Whether you're offering dine-in meals or takeaway services, it's essential to know how different rates apply and what conditions impact them.
If you're just starting your restaurant business, make sure your company is properly structured. You can explore the private limited company model or consider One Person Company (OPC) registration to benefit from limited liability and ease of compliance.
The restaurant GST rate for dine-in and GST for takeaway food are often assumed to be the same, but small variations depending on service structure, hotel category, and whether the restaurant is under the composition scheme can affect the rate. This blog explains it all — including how the 5% GST restaurant rate works, when it applies, and how small businesses can simplify their compliance process.
What is the GST Rate on Restaurant Food?
The GST rate on restaurant food in India generally falls under the 5% slab. However, this flat rate comes with a condition — restaurants opting for the 5% GST rate cannot claim Input Tax Credit (ITC) on their expenses like rent, raw materials, or packaging.
To understand how to get started with GST, refer to the GST registration process and check the documents required for GST Registration. If you want to estimate your costs, check GST registration fees.
Depending on the nature and structure of your restaurant, the applicable GST rates are:
- Restaurants operating independently or not inside hotels: 5% GST without ITC.
- Restaurants located inside hotels where the room tariff is below ₹7,500: 5% GST without ITC.
- Restaurants located inside hotels where the room tariff exceeds ₹7,500: 18% GST with ITC.
- Outdoor catering services (like event catering): 18% GST with ITC.
- Restaurants operating under the composition scheme: 5% GST with special conditions and restrictions.
This structure was designed to streamline taxation and replace the earlier system of service tax, VAT, and multiple local taxes. It helps unify the tax code across food services in India.
Dine-In vs Takeaway: What’s the Difference in GST?
A common question among restaurant owners is whether the GST rate for dine-in and takeaway is the same. The short answer is yes — in most cases, both services attract the same GST rate. However, the way the service is delivered may influence the restaurant’s eligibility for ITC and the treatment under the law.
- Dine-in restaurants, including cafes, bars, and fine-dining establishments that are not part of luxury hotels, charge 5% GST without ITC.
- Takeaway orders from the same premises also attract 5% GST without ITC, as long as the order is prepared and packaged on the same site.
- Food delivery services that operate through platforms like Zomato and Swiggy are taxed at 5%, but the platform (not the restaurant) collects and remits the GST.
Where it gets more nuanced is when the restaurant operates inside a hotel, or when it qualifies as a catering or cloud kitchen service — which may attract different rates depending on the circumstances.
The restaurant GST rate for dine-in and GST for takeaway food are closely aligned, but business owners must be mindful of how and where food is prepared and served.
Restaurants Under Composition Scheme
The composition scheme under GST is a simplified compliance option designed for small businesses, including small and medium-sized restaurants. This scheme allows restaurants with a turnover of up to ₹1.5 crore (or ₹75 lakh in special category states) to pay a fixed GST of 5% on their total turnover without the need to maintain detailed input-output records or claim input credit.
Key features of the composition scheme for restaurants include:
- A fixed GST rate of 5% on total turnover (2.5% Central GST + 2.5% State GST).
- No eligibility to claim Input Tax Credit (ITC).
- Quarterly returns instead of monthly.
- Inability to conduct interstate sales or deliveries.
- Applicable only for non-alcohol serving establishments.
Restaurants that want to minimize paperwork and keep compliance simple often choose the composition scheme. However, the trade-off is that they can’t claim ITC on purchases like kitchen equipment, raw materials, packaging, or rentals.
It’s important to evaluate whether this scheme works for your business, especially if you’re scaling up or dealing with bulk procurement where input credit might reduce overall tax burden.
GST Rate Reference for Different Restaurant Services
Here’s a breakdown of GST rates applicable to various restaurant-related services, without using tables, as requested:
- For dine-in restaurants not located in high-end hotels: 5% GST without ITC.
- For takeaway or parcel services from restaurants: 5% GST without ITC.
- For food delivery through online platforms: 5% GST collected by the aggregator.
- For outdoor catering services (e.g., at weddings or events): 18% GST with ITC.
- For restaurants located in hotels where room tariff exceeds ₹7,500: 18% GST with ITC.
- For restaurants in hotels with room tariff below ₹7,500: 5% GST without ITC.
- For sale of alcohol: GST is not applicable; VAT is levied by state governments.
- For cloud kitchens: Typically 5% GST without ITC, similar to regular restaurants.
Understanding these categories ensures accurate GST billing and protects businesses from compliance risks.
Impact of GST on Restaurant Bills
The introduction of GST simplified how restaurants bill customers. Before GST, restaurant bills were subject to multiple taxes — VAT on food, service tax on services, and cess in some cases. With GST, all these have been subsumed under one tax rate.
If a customer receives a bill for ₹500 at a regular restaurant:
- Under the current 5% GST regime, the customer will pay ₹525 (₹500 + ₹25 GST).
- There is no segregation of service tax or VAT in the final bill.
- Restaurants under composition scheme cannot show GST on invoices — they simply include it in the pricing.
For the business:
- No ITC can be claimed on rent, ingredients, or delivery expenses.
- Separate billing is required for alcohol, which is taxed under state VAT laws.
This has led to simplified compliance but has also reduced margins for restaurants that spend heavily on infrastructure or advertising, since they can no longer offset those expenses through ITC.
How to Stay Compliant: Practical Tips for Restaurants
Maintaining GST compliance is essential to avoid penalties, audits, and legal challenges. Whether you’re a food truck, a cloud kitchen, or a multi-outlet brand, the following best practices will help:
- Maintain digital invoices for every sale, with clear breakdowns of GST where applicable.
- File GSTR-1 and GSTR-3B returns on time, every month or quarter as per your registration.
- If you’ve opted for the composition scheme, file CMP-08 every quarter and GSTR-4 annually.
- Ensure your POS (point of sale) or billing software applies the correct GST rate.
- Avoid charging GST if you’re under the composition scheme — it's illegal to do so.
- Keep records of purchase bills and input materials even if you're not claiming ITC — for audit purposes.
- Understand whether your restaurant qualifies for a higher rate under hotel provisions or catering rules.
- Don’t confuse service charge (which is optional and goes to staff) with GST — it’s not a tax.
Regular staff training and consultation with a GST expert can help you navigate changes and stay compliant.
Need help filing your GST returns or deciding between regular and composition scheme? Finodha makes GST registration, return filing, and restaurant tax compliance fast, affordable, and accurate — starting at just ₹165.
Whether you're running a food truck, cafe, or cloud kitchen, let Finodha handle the paperwork while you focus on cooking great food.
Talk to Finodha’s experts now and get your restaurant GST-compliant in no time.
Final Thoughts
The GST rate on restaurant food is primarily set at 5% for both dine-in and takeaway, with specific exceptions for hotels, outdoor catering, and alcohol sales. While GST has simplified indirect taxation in the food industry, the loss of ITC for most restaurants means that pricing, profitability, and billing need to be handled carefully.
Restaurant owners should evaluate whether the 5% GST restaurant rate with no ITC is best for their business model, or whether the composition scheme offers greater benefits. Compliance, transparency, and correct billing are key to building a reliable restaurant brand in the GST era.
If navigating GST feels overwhelming, there are affordable services designed to take the burden off your plate.
Frequently Asked Questions (FAQs)
Q1. What is the GST rate on restaurant food?
The GST rate on restaurant food is generally 5% without Input Tax Credit (ITC). However, in cases like hotel-based restaurants or catering, the rate may go up to 18%.
Q2. Is GST different for dine-in and takeaway?
No, in most cases the GST rate is the same — 5% without ITC for both dine-in and takeaway. However, special conditions may apply in hotels or catering services.
Q3. Can restaurants opt for 5% without ITC?
Yes, most regular restaurants and cloud kitchens operate under the 5% GST rate without claiming ITC. This is the default option unless they fall under hotel or catering categories.
Q4. Is service charge also taxable under GST?
No, the service charge is not a government levy — it is optional and added by the restaurant for staff. It is not part of GST, though it should be clearly separated on the bill.
Q5. What is the GST for cloud kitchens?
Cloud kitchens are taxed at 5% without ITC, just like traditional dine-in or takeaway restaurants, unless they provide catering or large-scale event services.
Q6. Can a restaurant under the composition scheme charge GST?
No, restaurants under the composition scheme cannot charge GST separately on invoices. They pay a flat 5% tax from their turnover and must include tax in the price.
Q7. How often do restaurants need to file GST returns?
Restaurants under the regular scheme must file monthly returns (GSTR-1 and GSTR-3B), while those under the composition scheme file quarterly CMP-08 and annual GSTR-4.
Q8. Is alcohol included in GST on restaurant food?
No, alcohol is not covered under GST. It is taxed separately by individual state governments under VAT.