GST on restaurant food is commonly discussed as “5% GST without input tax credit,” but restaurant owners must classify the supply correctly. Hotels, specified premises, outdoor catering, packaged goods and mixed supplies can require different treatment. Always verify the current notification and your facts.
The common restaurant-service position
Many ordinary restaurant services are taxed at 5% GST without input tax credit (ITC), subject to the legal classification and current rules. The restriction means GST paid on eligible business inputs cannot simply be claimed in the way many other GST-registered businesses claim credit.
Use the official GST portal and CBIC GST resources for current law and notifications.
Simple bill example
| Description | Amount |
|---|---|
| Taxable restaurant value | ₹1,000 |
| CGST at 2.5% | ₹25 |
| SGST at 2.5% | ₹25 |
| Total bill | ₹1,050 |
For an inter-state supply where legally applicable, IGST treatment may differ. Configure the POS only after professional confirmation of place-of-supply and classification rules.
Why input tax credit matters
Under a 5%-without-ITC restaurant classification, GST paid on rent, equipment, services or other purchases may become a cost rather than a recoverable credit, subject to the law. Include this in investment and menu-pricing decisions. Do not advertise a food-cost or equipment budget using pre-tax numbers if the tax is not recoverable.
Situations needing special review
- Restaurant service within hotels or “specified premises”
- Outdoor catering and event contracts
- Sale of packaged or branded goods as separate supplies
- Alcoholic liquor, which is outside GST but may attract state taxes
- Composite or mixed supplies such as accommodation plus meals
- Cloud kitchens and delivery-platform transactions
- Franchise, royalty and management-service arrangements
Delivery platforms
E-commerce operator rules can affect who pays GST on certain restaurant services supplied through platforms. This does not remove the restaurant’s responsibility to reconcile orders, fees, tax invoices, credit notes, TCS where applicable and accounting records. Match platform statements to POS sales and bank settlements every month.
GST registration
Registration depends on turnover, state, nature of supply, business structure and exceptions. Do not rely on an old blog threshold. Check the current position on the official portal or with a qualified GST professional. Display the GSTIN and issue tax invoices or bills of supply as legally required for your registration and supply type.
Invoice-control checklist
- Correct legal name, address and GSTIN
- Unique invoice number and date
- Correct place of supply where relevant
- Taxable value, rate and GST breakup
- Discount and service-charge treatment
- Separate treatment for alcohol or other non-GST items
- Daily POS-to-accounting reconciliation
Service charge is not GST
A service charge, if levied lawfully and disclosed appropriately, is a restaurant charge; GST is a statutory tax. They should not be presented as the same thing. Review current consumer-protection directions and obtain advice before changing the billing structure.
Monthly owner controls
- Reconcile POS sales by tax category.
- Match delivery-platform order and settlement data.
- Review cancellations, discounts and credit notes.
- Confirm returns and payment before deadlines.
- Keep invoices, contracts and working papers.
Connect tax treatment with the menu-pricing guide and your restaurant business plan.
Important
GST classifications and notifications can change. This guide is educational and not tax advice. Obtain written advice based on your exact premises, turnover, menu, contracts and sales channels.