GST rules for restaurants and food businesses are different from other sectors. Different rates apply based on restaurant type, AC/non-AC, location, and service model. Here is the complete 2026 GST guide for the food industry.
GST Rates for Restaurants
- Standalone restaurants (AC or non-AC): 5% GST without ITC
- Restaurants in 5-star hotels (room tariff Rs 7,500+): 18% GST with ITC
- Outdoor catering in hotels with room tariff Rs 7,500+: 18% GST with ITC
- Outdoor catering otherwise: 5% GST without ITC
- Takeaway and home delivery: Same as dine-in rate
- Cloud kitchens: 5% GST without ITC
Food Items GST Rates
- Most food items: 5% GST
- Branded packaged food: 5% or 12% (varies)
- Restaurant-served food: 5% (most cases)
- Beverages (carbonated): 28% GST + cess
- Alcohol: NOT under GST (state excise applies)
- Mineral water: 18% GST
- Tea/coffee/milk: 5% GST
Input Tax Credit (ITC) Rules
- Restaurants charging 5% GST: NO ITC available on inputs
- Restaurants charging 18% GST: Full ITC available
- Cannot claim ITC on food provided to employees as perks
- Can claim ITC on capital goods (equipment) under 18% category
- Cannot mix 5% and 18% supplies easily
Composition Scheme for Restaurants
- Available for restaurants with turnover up to Rs 1.5 crore
- Pay 5% tax (2.5% CGST + 2.5% SGST) on turnover
- No ITC, but simplified compliance
- File CMP-08 quarterly + GSTR-4 annually
- Cannot supply alcohol or interstate sales
GST Registration Threshold for Food Business
- Mandatory if annual turnover exceeds Rs 20 lakh (services)
- For pure goods (food retailing): Rs 40 lakh threshold
- Mandatory regardless of turnover for: Inter-state supply, e-commerce sellers (Zomato/Swiggy), casual taxable persons
Billing Requirements
- Tax invoice for B2B supplies
- Bill of supply for B2C (or composition scheme)
- GSTIN must be displayed on bill
- HSN/SAC code mention required
- CGST + SGST split for intra-state
- IGST for inter-state
- Service charge is OPTIONAL — customer can refuse
E-Commerce Operator Rules (Zomato/Swiggy)
- Effective Jan 1, 2022: E-commerce operators are deemed suppliers
- Zomato/Swiggy collect 5% GST and remit to government
- Restaurants do NOT charge GST on these orders
- But you must mention these supplies in GSTR-1 (B2C-other)
- Mandatory GST registration for selling on these platforms
Common Mistakes to Avoid
- Charging wrong GST rate based on AC/non-AC (no longer matters since 2017)
- Not registering when crossing threshold
- Mixing 5% and 18% supplies incorrectly
- Claiming ITC under 5% scheme
- Not maintaining proper purchase invoices
- Missing composition scheme deadline
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