GST on Restaurant and Food Services in India: Rates, Rules and Compliance (2026)

If you run a restaurant, cafe, cloud kitchen, catering service, or sweetshop in India, GST applies to almost every bill you raise. The rate structure is straightforward once you understand the categories, but the rules around input tax credit, aggregator platforms, and composition scheme eligibility have practical implications for your margins and compliance workload.

This guide covers every scenario a food business owner in India will face under the current GST framework.

GST Rates for Restaurants: The Complete Table

The rate that applies to your food business depends on the type of establishment and whether it is located within a hotel.

The distinction between 5% and 18% rests on a single criterion: whether the restaurant is located in a premises where the declared room tariff of any unit of accommodation is above ₹7,500 per night.

Why No Input Tax Credit at 5%?

Before October 2019, restaurants could choose between paying 18% GST with ITC or 12% GST with ITC (depending on whether they were AC or non-AC). The GST Council found that many restaurants were charging 18% to customers, claiming ITC, and not passing the benefit to consumers.

In its 37th meeting, the Council replaced this with a flat 5% rate without ITC for all restaurants except those in luxury hotels. The intent was to ensure that diners pay a lower effective rate. For restaurant owners, this means:

• You cannot claim credit on GST paid for rent, kitchen equipment, raw materials (vegetables, oil, spices attract 5% or 12% GST), packaging, or professional services
• The 5% is the final cost for your customer
• Your input costs are fully absorbed into your margins

For restaurants operating at the 18% rate (inside ₹7,500+ hotels), full ITC on inputs is available. This makes the effective tax burden often lower than 18%, depending on the ratio of input costs to revenue.

Composition Scheme for Small Restaurants

If your restaurant's aggregate annual turnover does not exceed ₹1.5 crore (₹75 lakh for businesses in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand), you can opt for the Composition Scheme.

How it works:

Key restriction: Restaurants selling through food delivery platforms (Swiggy, Zomato, Magicpin) cannot opt for the Composition Scheme. Section 10(2)(d) of the CGST Act bars composition dealers from supplying goods or services through an e-commerce operator.

When composition makes sense: If your restaurant is dine-in only, does no inter-state catering, and your billing volume makes monthly GSTR-1/3B filing burdensome, composition reduces your compliance from 25+ filings per year to 5 (four quarterly CMP-08 returns plus one annual GSTR-4).

Cloud Kitchens and Virtual Restaurants

Cloud kitchens (delivery-only kitchens with no physical dine-in space) are treated as restaurant services for GST purposes. The rate is 5% without ITC, same as any other restaurant.

Mandatory registration for e-commerce sellers: Under Section 24(ix) of the CGST Act, any person supplying goods or services through an e-commerce operator must register for GST, irrespective of turnover. If your cloud kitchen sells through Swiggy, Zomato, or any aggregator platform, you must obtain GST registration even if your annual turnover is below ₹20 lakh.

What this means in practice:

• A cloud kitchen with ₹8 lakh annual turnover selling only through Zomato still needs GSTIN
• Since the aggregator deposits GST on your behalf under Section 9(5), your output tax liability is discharged by the platform
• You still need to file GSTR-1 and GSTR-3B monthly, reporting the supplies made through the platform
• You cannot claim ITC on rent, raw materials, or packaging

GST When Selling Through Swiggy, Zomato, and Other Platforms

Since January 1, 2022, e-commerce operators (ECOs) supplying restaurant services are deemed the supplier of those services under Section 9(5) of the CGST Act, 2017 (as notified via Notification No. 17/2021-Central Tax (Rate)).

What this means for your restaurant:

1. The platform collects GST from the customer. When a customer orders food worth ₹500 through Zomato, Zomato collects 5% GST (₹25) from the customer and deposits it with the government.

2. You do not charge GST separately. Your invoice to the aggregator should reflect the base price. The platform handles the GST liability on restaurant services.

3. Platform commission attracts 18% GST. The commission fee (typically 15% to 30% of order value) that Swiggy or Zomato charges you is classified as an intermediary service and attracts 18% GST. You pay this as part of your commission deduction but cannot claim ITC on it (since you are at 5% without ITC).

4. TCS does not apply. Since restaurant services are notified under Section 9(5), the TCS provision under Section 52 does not apply to restaurant supplies through platforms. The platform is the deemed supplier, not a collector.

5. Reconcile your GSTR-2B. The platform's GSTR-1 filing should reflect your supplies. Cross-check the amounts reported by the aggregator in your GSTR-2B each month.

Outdoor Catering: Rates and Classification

Outdoor catering (SAC 996332) is food preparation and service at a location other than your restaurant premises, typically for events, weddings, corporate functions, or party orders with on-site service.

The mandatory 5% rule: The Tamil Nadu Authority for Advance Rulings (AAR) clarified that outdoor catering services fall under Entry 7(iv) of Notification 11/2017-CT(Rate) at 5% without ITC. This rate is mandatory, not optional. A caterer cannot choose to pay 18% with ITC to optimize their credit position.

Exception: Outdoor catering provided at "specified premises" (hotels with room tariff above ₹7,500 per night) attracts 18% GST with ITC.

Practical distinction: If your restaurant does weekend party catering at a customer's home, farmhouse, or office, you charge 5%. If you provide catering services at a five-star hotel's banquet hall (where room tariffs exceed ₹7,500), the 18% rate applies.

Sweetshops, Bakeries, and Mixed Businesses

Many food businesses in India combine restaurant service with retail sale of goods (a sweetshop with a dining area, a bakery with a cafe counter). The GST treatment depends on how the supply is made.

From the restaurant/dining area (composite supply):

When food items (sweets, namkeens, cold drinks, snacks) are served to customers dining in or sold as takeaway from the restaurant counter, the entire sale is treated as a composite supply. Restaurant service is the principal supply, and the 5% rate without ITC applies to the full bill.

The Rajasthan AAAR (in the Gangaur Sweets case) confirmed this treatment: all items supplied from a restaurant counter are restaurant services regardless of whether the items could individually attract a different GST rate.

From the retail shop counter (supply of goods):

If the same business has a separate sweetshop or bakery retail counter that sells packaged or loose items without any restaurant service element, those sales are classified as supply of goods. The applicable GST rate depends on the item:

Record-keeping requirement: If you operate both a restaurant and a retail counter, maintain separate billing and accounting records for each. This is not optional. The AAR rulings require clear segregation to determine which supply is restaurant service and which is goods.

GST Registration Threshold for Food Businesses

Monthly Compliance for Restaurants Under Regular Scheme

If you are not under the Composition Scheme, your monthly GST filing obligations include:

GSTR-1 (by 11th of next month): Report all outward supplies (invoices raised) for the month. For restaurants selling through platforms, report platform sales separately using the "supplies through e-commerce operators" table.

GSTR-3B (by 20th of next month): Summary return showing total output tax, any ITC (usually nil for 5% restaurants), and net tax payable. For restaurants where the aggregator has already paid tax under Section 9(5), show these as supplies on which tax is paid by the ECO.

Annual return GSTR-9 (by December 31): Consolidated annual return. Mandatory if your turnover exceeds ₹2 crore.

IMS reconciliation: From FY 2026-27, the Invoice Management System (IMS) on the GST portal requires you to accept, reject, or keep pending the invoices reported by your suppliers. Even though you cannot claim ITC at 5%, you still need to manage the IMS dashboard as invoices reported against your GSTIN appear there.

Common Mistakes Restaurant Owners Make

1. Charging 18% instead of 5%. Unless your restaurant is inside a hotel with ₹7,500+ room tariff, you must charge 5%. Charging 18% and pocketing the difference without depositing the excess is a compliance risk.

2. Claiming ITC when on 5% rate. The 5% concessional rate is explicitly conditional on not availing ITC. Claiming ITC while paying 5% will trigger demand notices during assessment.

3. Not registering despite selling through aggregators. The ₹20 lakh threshold does not apply if you sell through Swiggy, Zomato, or any e-commerce operator. Registration is mandatory from day one.

4. Composition dealer selling through platforms. If you opted for composition but later started accepting orders through a food delivery app, you have violated Section 10(2)(d). Migrate to regular scheme immediately or face penalties.

5. Not reconciling platform payments with GSTR-2B. The amount Zomato/Swiggy reports as your supply may differ from what they actually deposit to your bank (after commission, penalties, and adjustments). Reconcile monthly.

6. Mixing restaurant billing with retail shop billing. If you run a sweetshop-cum-restaurant, issue separate bills from each counter. Using a single billing series creates ambiguity about the applicable rate.

Practical Example: Monthly GST for a Small Restaurant

Consider a standalone restaurant in Hyderabad with monthly revenue of ₹6 lakh (₹5 lakh dine-in + ₹1 lakh through Zomato).

Dine-in sales (₹5,00,000):

• GST at 5% = ₹25,000 (₹12,500 CGST + ₹12,500 SGST)
• Restaurant collects this from customers and deposits via GSTR-3B

Zomato sales (₹1,00,000):

• GST at 5% = ₹5,000
• Zomato collects this from the end customer and deposits it with the government under Section 9(5)
• Restaurant reports this in GSTR-1 but does not pay tax on it again in GSTR-3B

Zomato commission (say 25% of order value = ₹25,000 + 18% GST = ₹4,500):

• ₹4,500 is the GST on commission that Zomato charges
• Restaurant cannot claim ITC on this amount (ITC blocked at 5% rate)
• This becomes a cost absorbed into operating expenses

Total GST deposited by restaurant: ₹25,000 (only on dine-in and direct delivery sales) Total GST deposited by Zomato on restaurant's behalf: ₹5,000

When to Choose Regular vs Composition

Choose Composition if:

• Your turnover is below ₹1.5 crore
• You only do dine-in and direct delivery (no aggregator platforms)
• You do not supply food inter-state
• You want to file quarterly instead of monthly
• Your customers do not need a tax invoice (B2C only)

Stay on Regular Scheme if:

• You sell through Swiggy, Zomato, or any food delivery platform
• You provide inter-state catering services
• Your turnover exceeds ₹1.5 crore
• Your B2B customers need tax invoices for their expense claims
• You operate in a hotel with room tariff above ₹7,500 (to benefit from ITC at 18%)

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Sources and verification: This guide draws from Notification No. 11/2017-Central Tax (Rate) as amended, Section 9(5) and Section 10 of the CGST Act 2017, Notification No. 17/2021-Central Tax (Rate) dated November 18, 2021, and AAR/AAAR rulings on outdoor catering (Tamil Nadu AAR, 2023) and composite supply by sweetshops (Rajasthan AAAR, Gangaur Sweets). Rates and thresholds verified against ClearTax (cleartax.in/s/impact-gst-food-services-restaurant-business), BajajFinserv (bajajfinserv.in/gst-on-restaurant), IndiaFilings (indiafilings.com/learn/gst-composition-scheme-restaurants), and TaxGuru (taxguru.in/goods-and-service-tax/gst-restaurants-services.html) as of May 2026.