GST on Food and Restaurants

Restaurant owner often gets confused about how GST applies to them or whether the GST is something they should apply for or not.

Under the GST system, restaurants are classified as “food service providers” and are subject to GST at a rate of 5%.

However, restaurants where the room tariff is more than or equal to Rs.7,500/- is entitled to have 18% GST with ITC.s

In this article, we will discuss GST on Restaurants, different rates applicable, benefits, etc.

GST on Food and Restaurants

GST Rates on Restaurants

The following are the GST rates on restaurants of different categories-

S NoType of RestaurantsGST Rate
1Railways/IRCTC5% without ITC
2Standalone restaurants5% without ITC
3Standalone outdoor catering services5% without ITC
4Restaurants within hotels (Where room tariff is less than Rs 7,500)5% without ITC
5Normal/composite outdoor catering within hotels (Where room tariff is less than Rs 7,500)5% without ITC
6Restaurants within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC
7Normal/composite outdoor catering within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC

GST on Composition Scheme for Restaurants

The restaurant owner must abide by the rules set up for the restaurant, the following are the rules which apply to the restaurant-

  • The turnover of the restaurant must not exceed Rs.1.5 crores (Rs 1 Crore in case of special category States)
  • The restaurant should not have any other services other than a restaurant unless the service comes under special exceptions
  • No outward supply of the goods is allowed for the restaurant
  • NO alcohol should be served or any item not taxable under GST
  • The restaurant cannot use the services of the eCommerce Operator
  • No Input Tax Credit option is available to the restaurant business
  • Restaurants cannot collect taxes from the customers

Regular Tax Payers V/s Composite Tax Payers

Particulars          Regular Tax Payer           Composite Tax Payer
RegistrationThreshold limit – Rs. 20LThreshold limit – Rs. 1.5 Cr
Territory of BusinessNo restriction on the supplyLimited to Intra-State Supply
Switch from Regular to Composition or Vice versaCompliance procedure is highOnce crosses the limit, compulsory registration under regular provisions
Input tax creditDepends on the categoryNot entitled to avail of the credit
Business through e-commerceCan supply goods through e-commerceCannot supply goods through e-commerce
Tax collectionAllowed to collect tax from the buyerCannot collect tax from the buyer
Tax invoiceCan raise a tax invoice for outward supplyCan raise Bill of Supply instead of Tax invoice for outward supply
GST returnsMonthly – GSTR 1 & GSTR 3BQuarterly – Only GSTR 4

Benefits for Restaurants to Apply for GST

The following are the benefits for a restaurant to apply for GST-

  • GST simplifies the taxation of the restaurant by substituting multiple indirect taxes with a single tax.
  • Compliance for a restaurant with the tax laws becomes easy
  • It promotes transparency and helps to reduce the corruption
  • It helps the restaurant to get detailed records of their sales and purchases
  • It makes it easier for restaurants to expand their business
  • It improves the credibility and reputation of the restaurant


What is the highest rate of GST applicable on the food?

The highest tax rate applicable on food is 18% and is only applicable to food items that come under the non-essential category.

Is GST applicable on Food delivery?

Yes, GST is applicable on the Food delivery and is 5% or 18% depending on the location of the restaurant.

What is the GST applicable to chocolate and Cocoa Products?

The GST applicable on the chocolate and Cocoa products is 18% as t comes under the non-essential items.

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