GST on Restaurants: 5% vs 18%, Composition, and Food Delivery Rules
Most restaurants charge 5% GST with no input tax credit. Restaurants in "specified premises" charge 18% with credit. Here is how to know which applies, what Swiggy and Zomato pay, and when composition makes sense.
GST on Restaurants and Food Services
Most standalone restaurants, cafés and cloud kitchens charge 5% GST and cannot claim input tax credit (ITC). Restaurants inside hotels whose declared room tariff exceeds ₹7,500 per unit per day ("specified premises") charge 18% with full ITC. When food is ordered through Swiggy, Zomato or another app, the app itself collects and pays the 5% GST under Section 9(5) of the CGST Act, not the restaurant.
What GST rate applies to my restaurant?
| Type of supply | GST rate | ITC allowed? |
|---|---|---|
| Standalone restaurant, café, dhaba, cloud kitchen | 5% | No |
| Takeaway and home delivery by the restaurant | 5% | No |
| Restaurant in "specified premises" | 18% | Yes |
| Outdoor catering (other than specified premises) | 5% | No |
| Food supplied through an e-commerce operator | 5%, paid by the operator | No |
| Composition restaurant | 5% of turnover (2.5% CGST + 2.5% SGST) | No |
There is no separate rate for air-conditioned versus non-AC restaurants, or for serving alcohol. Liquor itself is outside GST and taxed by the state.
What are "specified premises"?
From 1 April 2025, a premises is "specified" if, in the preceding financial year, the hotel supplied accommodation at a declared tariff above ₹7,500 per unit per day, or if the hotel voluntarily opts in by filing a declaration before the start of the financial year. A restaurant located in such a hotel charges 18% with ITC. A standalone restaurant cannot choose 18%.
Can a restaurant claim input tax credit?
At 5%, no. That means GST paid on rent, equipment, packaging, interiors and professional fees becomes a cost. Budget for it when signing a lease. On a ₹2 lakh monthly rent, 18% GST (₹36,000) is not recoverable.
Who pays GST on Swiggy and Zomato orders?
From 1 January 2022, the e-commerce operator collects GST from the customer and deposits it. The restaurant:
- does not charge GST on these orders in its own invoices to customers,
- still reports them in GSTR-1 (Table 14 for supplies through ECOs) and GSTR-3B,
- in practice needs a GSTIN to list on the apps, even below the ₹20 lakh threshold.
Reconcile your app settlements monthly. Commission charged by the platform attracts 18% GST, and you cannot claim it at the 5% rate.
Should my restaurant opt for composition?
Composition is available up to ₹1.5 crore turnover (₹75 lakh in special category states). Tax is 5% of turnover, filed quarterly in CMP-08 and annually in GSTR-4.
Since the regular rate is also 5% without ITC, the difference is mostly compliance:
- Composition: quarterly payments, simple returns, but you cannot collect GST from customers. The 5% comes from your margin.
- Regular: monthly or QRMP filing, and you collect 5% from customers on top of the menu price.
For most restaurants that print menu prices "plus taxes", the regular scheme is better. Composition suits dhabas and small eateries with all-inclusive pricing.
Worked example: margin impact
A Koramangala café bills ₹10 lakh a month.
| Regular (5%) | Composition (5%) | |
|---|---|---|
| Customer pays | ₹10.5 lakh | ₹10 lakh |
| GST deposited | ₹50,000 | ₹50,000 |
| Café keeps | ₹10 lakh | ₹9.5 lakh |
The café under composition loses ₹6 lakh a year of revenue unless it raises menu prices.
Is service charge taxable?
If you levy a service charge, GST applies on it at the same rate as the food. The Central Consumer Protection Authority guidelines of 2022 prohibit making service charge compulsory, and the Delhi High Court upheld those guidelines in 2025. Show it as optional or drop it.
Common restaurant GST mistakes
- Claiming ITC at the 5% rate. This is disallowed and leads to reversal with interest.
- Charging GST on app orders that the aggregator already paid.
- Mismatch between app settlement reports and GSTR-1.
- Not registering the central kitchen and outlets in different states separately.
How SP & SC helps
We register restaurants and cloud kitchens, reconcile aggregator settlements every month, file GSTR-1 and GSTR-3B, and defend ITC and mismatch notices. See GST registration and GST return filing, or ask for a fixed-fee quote.
Frequently asked questions
Is GST on restaurants 5% or 18%?
5% without ITC for almost all restaurants. 18% with ITC only for restaurants in specified premises (hotels with tariffs above ₹7,500).
Do I need GST registration for a small restaurant?
Registration is mandatory once turnover crosses ₹20 lakh (₹10 lakh in special category states). Food aggregators also require a GSTIN before listing.
Is GST charged on packaged water and soft drinks sold in a restaurant?
When served as part of the restaurant service, they are taxed at the restaurant rate. Sold as sealed goods over the counter at MRP, the goods rate applies.
Can a cloud kitchen claim ITC?
No. Cloud kitchens are restaurant service suppliers at 5% without ITC.
Is GST payable on food ordered through Zomato?
Yes, 5%, but Zomato collects and pays it under Section 9(5). The restaurant does not pay it again.
Written by
SP & SC Editorial
Editorial team at SP & SC Legal and Taxation Services — practising advocates, chartered accountants, and company secretaries publishing hands-on guidance from live client files.
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