GST billing rules for restaurants in India, explained
8 min readPublished Feb 10, 2026Updated Jun 22, 2026
Quick answer
Most standalone restaurants in India charge 5% GST on food and beverages — split as 2.5% CGST and 2.5% SGST — and in return cannot claim input tax credit (ITC) on their purchases like rent, gas, or packaging. The higher 18% rate applies mainly to restaurants located inside hotels where the declared room tariff is above ₹7,500 per night; those establishments charge 18% but are allowed to claim ITC. Alcohol sits outside GST entirely and is taxed under state VAT or excise, so it must appear on a separate line.
Which slab you fall under is decided by your establishment type, not by preference, so a dine-in restaurant, a takeaway counter, and a cloud kitchen almost always bill at 5% without ITC. A compliant tax invoice must still carry your GSTIN, an invoice number and date, the SAC/HSN code, the taxable value, and the CGST/SGST split. Because genuine edge cases exist — combined hotel-and-restaurant setups, outdoor catering, and ITC on capital goods — confirm your exact treatment with a chartered accountant before you finalise your billing setup.
5%
GST on most standalone restaurant food (2.5% CGST + 2.5% SGST), with no input tax credit
18%
GST for restaurants inside hotels with room tariff above ₹7,500/night — ITC allowed
₹1.5 crore
annual turnover ceiling to opt into the GST composition scheme for restaurants
What GST rate applies to restaurant food?
For the vast majority of eateries — standalone dine-in restaurants, cafés, takeaway joints, and cloud kitchens — food and non-alcoholic beverages are taxed at 5% GST with no input tax credit. That single rate covers dine-in, parcel, and delivery, so you don't switch slabs based on how the customer eats.
The 18% slab is the exception, not the rule. It applies to restaurants operating inside a hotel whose published room tariff crosses ₹7,500 a night, and those places can claim ITC to offset the higher output tax. Alcoholic drinks never attract GST at all; they are billed under state liquor tax and shown separately on the bill.
- Standalone restaurant / café / cloud kitchen: 5% GST, no ITC
- Restaurant in a hotel with room tariff > ₹7,500/night: 18% GST, ITC allowed
- Alcohol: outside GST — taxed under state VAT/excise on a separate line
- Same food rate whether dine-in, takeaway, or delivery
5% without ITC vs 18% with ITC — what's the difference?
Input tax credit is the GST you have already paid on business purchases — rent, LPG, equipment, packaging, software — which you can normally subtract from the GST you collect from customers. At the 5% restaurant rate the government deliberately blocks this credit: you pay 5% to the exchequer on your sales and simply absorb the GST embedded in your costs.
At 18% (hotel restaurants) you charge customers more, but you get to reclaim the GST on your inputs, which softens the blow for a high-cost operation. You cannot mix the two — you don't get to charge 5% and still claim credit. This is why a small dine-in owner sees a clean 5% line on every bill and never files for ITC on the kitchen chimney they bought.
Should a small restaurant use the composition scheme?
The composition scheme is a simplified option for small businesses with aggregate annual turnover up to ₹1.5 crore. A restaurant under it pays a flat 5% on turnover and files a quarterly statement (CMP-08) plus an annual return, instead of detailed monthly filings — far less paperwork for a single-outlet operator.
The trade-offs are real. A composition dealer cannot charge GST separately to customers (you absorb it into your menu price), cannot claim ITC, and cannot make inter-state supplies. You must issue a 'bill of supply' rather than a tax invoice and display that you are a composition taxable person. It suits a small, local, cash-and-UPI dine-in or takeaway; it rarely suits anyone selling across state lines or wanting to pass tax on to corporate customers.
When does e-invoicing apply, and what must the invoice show?
E-invoicing — generating an Invoice Reference Number (IRN) and QR code from the government portal — is mandatory once a business crosses the aggregate turnover threshold, which has been progressively lowered to ₹5 crore. Most single-outlet restaurants sit below this and are not required to generate IRNs, but larger chains are, and big taxpayers must also print a dynamic QR code on B2C bills. Thresholds have changed several times, so verify the current limit for your turnover.
Regardless of e-invoicing, a compliant restaurant tax invoice has a fixed set of fields. Get these right and an audit is painless; miss them and even correct tax can be questioned.
- Your business name, address, and GSTIN
- A unique serial invoice number and the invoice date
- SAC code for restaurant service (or HSN for packaged goods sold as-is)
- Taxable value, then CGST and SGST shown separately with rates
- Total amount, with alcohol (if any) on its own non-GST line
What does GST-ready restaurant billing cost in India?
The software side is modest. Cloud POS plans that apply the correct 5%/18% split automatically and generate GSTR-1, GSTR-3B, and HSN summaries typically run ₹800–₹2,500 per month per outlet. A thermal receipt printer is a one-time ₹8,000–₹15,000. Expect a chartered accountant to charge roughly ₹1,000–₹5,000 a month to review and file returns for a small restaurant, depending on volume.
ERP Node applies GST slabs and HSN/SAC codes on every bill and produces filing-ready GST reports as part of its billing modules, priced per addon per month — so a small dine-in only pays for what it switches on. Whatever tool you pick, keep a chartered accountant in the loop for edge cases the software can't decide for you.
Frequently asked questions
Do restaurants charge 5% or 18% GST in India?
Standalone restaurants, cafés, takeaway counters, and cloud kitchens charge 5% GST (2.5% CGST + 2.5% SGST) on food, with no input tax credit. The 18% rate applies only to restaurants inside hotels where the room tariff exceeds ₹7,500 per night, and those can claim ITC.
Can a restaurant claim input tax credit on its purchases?
A restaurant billing at the 5% rate cannot claim ITC on purchases like rent, gas, or equipment — it absorbs that tax. Only restaurants charging 18% (typically inside premium hotels) may claim input tax credit against their output GST.
Is GST charged on the service charge added by a restaurant?
Service charge is a discretionary levy by the restaurant, not a government tax, and is optional for the customer. If a restaurant does levy it, GST is calculated on the total that includes the service charge, because it forms part of the taxable value of the supply.
Does a restaurant have to show GST separately on the bill?
Yes — a tax invoice must show the taxable value and then CGST and SGST separately with their rates, along with your GSTIN, invoice number, date, and SAC/HSN code. A composition-scheme restaurant is the exception: it issues a bill of supply and cannot show GST as a separate charge.
See it in ERP Node