GST on Restaurants in India: Rates, Rules & Latest Updates

The food business in India is growing very quickly. Today you can see many types of food businesses such as small cafés, street food stalls, food trucks, fine dining restaurants, cloud kitchens and large restaurant chains. Because of this growth, the restaurant industry in India is booming in 2026.

However, when a business grows, it also comes with responsibilities. One of the most important responsibilities for restaurant owners is understanding GST on restaurants and food services in India.

Many people find GST confusing. Restaurant owners, accountants, food entrepreneurs and even customers often have questions like:

What is the GST rate on restaurants?, Is the GST rate 5% or 18%?, Can restaurants claim Input Tax Credit (ITC)?, What GST applies to food ordered from apps like Zomato and Swiggy?, Is GST different for hotel restaurants and catering services?

If you have these questions, you are not alone.

In this complete guide, we will explain GST on restaurants in India in 2026 in very simple English. There will be no difficult tax terms or complicated explanations. Instead, we will explain everything clearly so that you can understand how GST works, what rates apply and what restaurant businesses must do to follow the law.

What is GST on Restaurants in India?

GST stands for Goods and Services Tax. It is an indirect tax that replaced many older taxes such as VAT, service tax and excise duty.

GST was introduced in India in 2017. It is managed by the Goods and Services Tax Council. GST applies to most goods and services in India. This includes restaurant services and food businesses.

When you eat at a restaurant or order food from one, GST is charged on the total bill amount. However, alcohol is not covered under GST. Alcohol is taxed separately by the state government.

Also Read: Is Restaurant Business Profitable in India? Complete Guide 2026

GST Rates Applicable to Restaurants Explained Simply

Understanding the GST rate for restaurants has become easier over time. The government has divided restaurant services into different categories.

In most cases, restaurants fall into two main GST rate categories:

• 5% GST
• 18% GST

The most common GST rate for restaurants in India is 5%. Most restaurants, cafés and food outlets charge this rate.

However, when a restaurant charges 5% GST, they are not allowed to claim Input Tax Credit (ITC). This means they cannot recover the GST they paid on business expenses such as raw materials, furniture, rent or equipment.

The 18% GST rate applies only in special cases. This usually applies to restaurants located inside luxury hotels where the room tariff is above a certain limit. These restaurants are allowed to claim Input Tax Credit.

There is also a 0% GST rate for some small food sellers or certain raw food items. However, this usually does not apply to normal cooked meals served in restaurants.

GST on Dine-In Restaurants

When you go to a restaurant and eat there, it is called a dine-in service. As of 2026, the GST on dine-in food services in most restaurants is 5%.

Earlier, there used to be different GST rates for AC restaurants and non-AC restaurants. AC restaurants had a higher tax rate. But this rule was removed to make the tax system simpler.

Now, whether the restaurant has air conditioning or not, the GST rate is usually 5%. This 5% GST is charged on the total value of the food and drinks served, except alcohol.

For example:

If your food bill is Rs.1000, then:

• GST at 5% = Rs.50
• CGST = Rs.25
• SGST = Rs.25

Total bill = Rs.1050

This lower tax rate has made dining out more affordable for customers.

Also Read: How to Make a Restaurant Menu in 2026: Trends, Tips & Best Practices

GST on Takeaway Food from Restaurants

Many people today prefer takeaway food instead of dining inside the restaurant. Customers often think that takeaway food should have lower tax because they are not using the restaurant’s seating or service.

However, under GST law, takeaway food is treated the same as dine-in food.

The GST rate for takeaway food from restaurants is also 5%.

Even if you pack food from the counter and eat it at home, the restaurant still charges 5% GST.

This rule helps make billing simpler for restaurants. If the GST rate was different for dine-in and takeaway, it would create complicated accounting systems for restaurant owners.

GST on Online Food Delivery (Zomato, Swiggy)

Online food delivery has become extremely popular in India. Apps like Zomato and Swiggy handle millions of food orders every day. Earlier, restaurants were responsible for collecting and paying GST on these online orders. But many small restaurants avoided paying tax.

To fix this issue, the government changed the rule. Now the responsibility of collecting and paying GST lies with the food delivery platforms themselves. These platforms are called Electronic Commerce Operators (ECOs).

When you order food through an app, the app charges 5% GST. The platform then deposits this tax directly to the government. The customer still pays the same tax, but the tax is paid by the platform instead of the restaurant.

This rule ensures better tax compliance across the food industry.

GST on Restaurant Services Without AC

Earlier, restaurants without air conditioning were taxed at a lower rate. This created confusion because some restaurants had both AC and non-AC areas.

To simplify the system, the government removed this difference. Now the GST rate for non-AC restaurants is the same as other restaurants.

The GST rate is 5% without Input Tax Credit. Whether it is a small roadside dhaba or a simple family restaurant without AC, the tax rate is still 5%.

GST on Restaurants With AC or Central Heating

Today the presence of air conditioning does not affect GST rates for most restaurants.

Restaurants with AC or central heating also charge 5% GST. This rule helped simplify the GST system and reduce confusion.

Since the tax rate is only 5%, restaurants cannot claim Input Tax Credit. This means they cannot recover the GST they pay on electricity, rent or equipment.

Also Read: How to Improve Restaurant Sales: 21 Tips & Strategies

GST on Small Restaurants and Cafes

Small restaurants and cafés play a very important role in India’s food industry. For very small businesses, the government offers something called the Composition Scheme.

This scheme is designed for businesses with an annual turnover of up to Rs.1.5 crore. Under this scheme, the restaurant pays GST from its own turnover. They cannot charge GST separately from customers.

Instead of a tax invoice, the customer receives a Bill of Supply. However, many cafés and restaurants prefer the regular GST system where they charge 5% GST to customers.

GST on Fast Food Restaurants

Even though they are large companies, they follow the same GST rules as normal restaurants. The GST rate for fast food restaurants is also 5%. This applies to dine-in and takeaway orders. On the bill you will usually see:

• 2.5% CGST
• 2.5% SGST

GST on Bakery Items Sold in Restaurants

Bakeries often work in two ways. Some bakeries work like restaurants where people come to sit and eat. Others operate like shops selling packaged food items.

If you sit inside the bakery and eat cakes, pastries or snacks, the GST rate is 5% because it is considered a restaurant service.

However, if the bakery sells packaged items like biscuits, cakes or snacks over the counter, different GST rates may apply depending on the product. In most bakery-restaurant combinations, the 5% GST rate applies to food served inside the outlet.

GST on Beverages Served in Restaurants (Tea, Coffee, Soft Drinks)

Beverages served in restaurants follow the same GST rule as food. If the drink is prepared in the restaurant such as tea, coffee, milkshakes or fresh juice, the GST rate is 5%.

However, if the restaurant sells packaged drinks such as bottled water or canned soft drinks, the tax may already be included in the MRP.  If the restaurant charges more than MRP, GST may apply on the selling price.

GST on Alcohol in Restaurants (Liquor & Wine)

This is the most common source of confusion regarding the gst in restaurant bill. Alcohol for human consumption is constitutionally outside the purview of GST. The government has kept it under the state VAT regime.

Therefore, you will never see “GST” charged on your beer or whiskey. Instead, you will see “VAT” (Value Added Tax).

If you order food and alcohol together, you will receive a bill with two distinct parts. The food items will attract GST (usually 5%), and the alcohol will attract VAT. The restaurant cannot charge GST on the alcohol component. This dual-tax structure makes the billing process for bars and pubs slightly more complex than for standard restaurants.

Also Read: Restaurant Kitchen Size Guide: Square Footage Standards Explained

GST on Catering Services Provided by Restaurants

Catering is a massive industry in India, especially for weddings and corporate events. The gst rate on restaurant services extends to outdoor catering as well. This puts catering on par with restaurant services. This was a reduction from the earlier 18%, which had caused the catering industry to suffer.

However, if the catering is done at a premise that is a luxury hotel (room tariff above Rs. 7,500), the rate might jump to 18% with ITC. But for most standard wedding caterings and party orders, the client has to pay 5% tax on the total catering bill.

GST on Hotel Restaurants vs Standalone Restaurants

The location of the restaurant matters significantly if it is inside a hotel. This is the one area where the gst in 5 star restaurants differs from your local eatery.

If a restaurant is located within a hotel where the declared tariff of any unit of accommodation is less than Rs. 7,500 per night, the GST rate is 5% without ITC.

However, if the restaurant is located within a hotel where the room tariff is Rs. 7,500 or more per night, the GST rate is 18%. In this case, the restaurant is allowed to claim Input Tax Credit. The logic is that high-end hotels offer a luxury experience, and the higher tax rate is justified. So, when you dine at a luxury hotel, be prepared for the gst at restaurant to be 18%.

GST on Food Items Packed and Sold by Restaurants

Many restaurants have started selling their own branded spices, pickles, or ready-to-eat packets over the counter.

For these items, the restaurant gst rate of 5% does not automatically apply. The tax rate depends on the HSN code of the specific product. For example, if a restaurant sells a bottle of its signature pickle, it might attract 12% GST. If they sell branded namkeen, it might be 12%.

The restaurant must bill these items separately or apply the specific product tax rate, not the general service rate. This distinction is vital for accounting accuracy.

Input Tax Credit (ITC) for Restaurants – Allowed or Not?

Input Tax Credit (ITC) is the backbone of the GST system, allowing businesses to reduce their tax liability by claiming credit for taxes paid on purchases.

However, for the restaurant industry, the government removed the ITC benefit when they reduced the rate to 5%. This means a restaurant owner pays GST on rent (18%), commercial gas, furniture, and professional services, but they cannot claim this back against the 5% they collect from customers.

This blockage of ITC increases the operational cost for the restaurant. While the consumer sees a low 5% tax, the restaurant absorbs the taxes paid on inputs. Only restaurants charging 18% (in luxury hotels) are allowed to claim ITC. This rule is a major talking point in the industry regarding gst for restaurants in india.

Also Read: 10 Popular Types of Menu in Restaurant Industry (With Examples)

GST Registration Requirement for Restaurant Owners

Not every food seller needs to register for GST. The requirement depends on turnover.

For service providers like restaurants, GST registration is mandatory if the aggregate annual turnover exceeds Rs. 20 Lakhs. In some special category states (mostly in the North East and hilly regions), this limit is Rs. 10 Lakhs.

However, there is a catch. If a restaurant lists itself on an e-commerce platform like Zomato or Swiggy, registration is often required regardless of turnover because the platform needs to deduct and pay taxes. Therefore, almost all modern food businesses end up getting registered to access the online market. Once registered, they must charge the appropriate gst on food items in restaurant.

GST on Cloud Kitchens and Food Trucks

Cloud kitchens (delivery-only restaurants) and food trucks are treated exactly the same as brick-and-mortar restaurants under GST laws.

A cloud kitchen provides a restaurant service, even if there is no dining hall. Therefore, the restaurant gst rate is 5%. Similarly, a food truck is considered a mobile restaurant. They must also charge 5% GST on the food they serve.

Since cloud kitchens rely heavily on online aggregators, the aggregator often handles the tax payment (as discussed in the Swiggy/Zomato section). For food trucks, if they are below the turnover threshold and not on apps, they might not need to register. But if they are registered, the rate is 5%.

GST Invoice Format for Restaurants

To be compliant, a restaurant bill must contain specific details. A proper GST invoice should include:

• Name, address, and GSTIN of the restaurant.
• Invoice number and date.
• Customer details (if registered).
• Description of items (Food & Beverage).
• Total value of supply.
• The split of tax: CGST (2.5%) and SGST (2.5%).
• Signature (digital or physical).

If the restaurant is under the composition scheme, the bill must say “Composition taxable person, not eligible to collect tax on supplies” at the top. For customers, checking these details ensures that the gst in restaurant bill is legitimate.

Common GST Mistakes Made by Restaurant Owners

Despite the simplified rules, errors happen. Here are common mistakes regarding gst on restaurant services:

• Charging GST on Alcohol: As mentioned, alcohol attracts VAT, not GST. Charging GST on it is illegal.
• Wrong Rate Application: Charging 18% when the rate should be 5%, or vice versa.
• Claiming ITC Wrongly: Restaurants paying 5% tax claiming ITC on their expenses is a major compliance violation.
• Not Filing Returns: Failing to file GSTR-3B and GSTR-1 on time attracts penalties.
• Service Charge Confusion: Many owners (and customers) confuse Service Charge with Service Tax or GST. Service charge is voluntary income for the staff, while GST is a statutory tax. They are totally different.

Conclusion

Navigating the world of gst on restaurant services can seem daunting initially, but the current structure in 2026 is streamlined to be consumer-friendly. For the vast majority of your dining experiences, whether at a cafe, a fine-dine standalone restaurant, or via a delivery app, the magic number is 5%. This low rate ensures that the burden on the common man is minimized while bringing the massive unorganized food sector into the formal economy.

If you are a restaurant owner struggling to keep up with these regulations, or a consumer who constantly finds discrepancies in your bills, it is time to seek professional clarity. We recommend using robust billing software or consulting with a tax expert to ensure 100% compliance. Don’t let tax worries ruin the appetite—get your GST strategy sorted today!

Frequently Asked Questions about GST on Restaurants & Food Services