GST on Restaurant Bill: Latest Rates, Rules, and Changes

GST (Goods and Services Tax) is an indirect tax which is levied on the supply of goods and services. You must know the applicable GST on restaurant bill to avoid confusion in case you are dining out. Thus, restaurants usually charge a GST rate based on food and beverages, but the exact charge may depend on the establishment type. In this piece of writing, you will get a step-by-step guide about the GST on restaurant bills and more.

What is GST on Restaurant Bill in India?

The date is effective from April 1, 2025, the GST of restaurant bills of consumers who are eating at hotels come under the “specified premises” will be subject to an 18% GST rate with input tax credit (ITC). According to the latest government circulars, hotels that do not fall under the category of “specified premises” can continue to pay 5% GST rate, or they can opt to charge 18% GST, which depends on their chosen tax structure.

However, shifting to the higher rate will lead to an increase the customer costs. This can be mitigated by hotels through strategic planning and operations adjustments to manage their pricing and customer experience.

GST on Food and Restaurants in India

The Goods and Services Tax (GST) in India on food items and restaurant services depends on many factors. The factors can include the type of establishment, nature of supply (branded or unbranded), and the nature of service supplied, which means dine in or takeaway.

According to the current guidelines, it is stated that:

• Most of the restaurant services, such as dine-in and takeaway, are charged at the rate of 5% GST. This rate is provided to a restaurant that does not claim Input Tax Credit (ITC). This is the standard GST rate for restaurants suitable across most casual dining outlets.
• The food served in restaurants situated in hotels where the room tariff is more than Rs. 7,500 per night is attracted to 18% GST, in which input tax credit (ITC) is claimed.
• Food items, including cereals, pulses, and fresh vegetables, are exempt from GST when they are not packed or branded. On the other hand, branded and packaged food products will attract either 5% or 12% GST. This rate depends on the item and its branding status which impacts the applicable rate of food GST.

GST on restaurant food has replaced the earlier system of VAT and Service Tax to simplify the compliance for the sector. The service charge which is levied by some restaurants will be different from the GST and will remain discretionary to the customer.

However, the GST rate applicable for a restaurant depends on the food served in a restaurant, packed and branded or sold unprocessed. Businesses and consumers must stay updated with the latest rate slabs to get clarified about their tax liabilities.

In the case of alcoholic liquor for human consumption, there is no GST will be applicable. Alternatively, it is up to the various State Governments to tax it through excise duty and state-level taxes. Thus, GST on alcohol is not levied and state-level VAT is charged on Alcohol.

Pre-GST on Restaurant Bill

Restaurant bills had many components before the implementation of GST. Listed below are the key components of the pre-GST on restaurant bill:

• VAT: This is a tax which is applied to the food portion of the bill.
• Service Tax: This is a kind of tax which is charged on the services provided by the restaurant. 
• Service Charge: This is an additional charge applied by the restaurants but not by the government. However, this is not a tax. 

However, various menu items were taxable at different rates under the VAT system which makes billing very complicated. This was to be standardised under GST rates on food since different taxes were to be replaced by a single tax rate applicable on the entire bill.

Key GST Rules for Restaurants

According to GST, most restaurants in India fall under the 5% GST rate without any option to claim input tax credit (ITC) and 18% with Input Tax Credit (ITC). The rate of GST is defined based on the place in which the restaurant is located. For example, a higher GST rate will be charged for restaurants within hotels whose room tariff is more than a certain amount.

Below is the table outlining the GST rates applicable to food catering and restaurant services:

However, this table shows the individuals who are supplying catering or other services in hotels with a room tariff of Rs. 7 500, and more. This table does not include any hotel accommodation services.

Key GST Rate on Food Items

Most of the food items fall under the GST slab of 5%. There are various essential foods, such as fresh fruits, milk, veggies, and meat will be exempt from GST. The council has made some changes regarding the processed, packaged, and luxury items. Below is the table outlining the notable changes:

However, the government has reduced the tax burden for essential food items and increased the tax on luxury and indulgent items.

Impact on Restaurant Business Owners

According to the GST regime, the amount of Service Tax and VAT was combined into a single and unified tax rate. There may be a service charge for the food bills. Listed below are the key examples with the assumptions of VAT, which is applicable at 100% of the value without any abatement:

However, in the above example, you will find that the total amount will be payable to the tax authorities under the latest GST regime, which sums up to Rs. 950. According to GST, the net outflow from the pocket will be charged at Rs. 250.

Key Impact of GST on Food Items and Restaurants

Listed below are the key impacts of GST on food items and restaurants:

Reduction in Effective Tax

Customers had to bear multiple taxes that included VAT and Service Tax before the implementation of GST. These were integrated into a single rate under GST. This eliminates the total cost of dining out. However, the restaurant service charge will remain the same.

Input Tax Credit on Food and Restaurant Services

In the case of the restaurant owners, GST was supposed to increase cash flow by receiving back the Input tax credit, which they paid on items such as raw materials and rent. However, they could not claim ITC in the beginning. Although there have been several changes, restaurants charge 5% GST rate for food services, but cannot get such tax credits as those charging 18% tax.

Exemption for Fresh and Frozen Food

As far as food items are concerned, most of the fresh and frozen items, such as vegetables and meat, do not fall under the GST. It only includes packaged foods with brand names. The GST Rate for restaurants in five-star hotels, if room tariff is Rs-7500 and more then it’s 18% with ITC and if room tariff is less than Rs-7500 then it’s 5% without ITC.

Tax Slabs for Food Items

Food items and food services fall under different GST tax slabs that mainly attract to 5% and 12% GST rate. This helps to keep essential items of food out of high taxation. On the other hand, the maximum rate of GST applicable on restaurant food services is 18%.

Conclusion

GST on Restaurant bills basically helps customers understand what they pay for, and enables restaurant owners to follow proper compliance. The system ensures fairness with clear tax rates, transparent billing, and standardised rules for diners and businesses. It also allows informed customers to avoid overcharging and builds trust. Whether you run a restaurant or dine out, if you have the knowledge of how GST works, it will ensure smooth and more confident transactions.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.
FAQ

Q1. What is the standard rate of GST on restaurant bill?

The standard GST rate on restaurant bill is 5% for the most standalone restaurants without an Input Tax Credit (ITC).

Q2. Can a restaurant charge a higher GST rate?

Yes, a restaurant can charge a higher GST rate if it meets specific criteria. If it does not meet the criteria, then the restaurants must charge a standard 5% GST rate. A higher GST rate can be caused in such situations:

• Restaurants which is located within hotels and their room tariff for any room is Rs. 7,500 or more per day. This will be considered as "specified premises" and must charge an 18% GST on all food and beverage services.
• Outdoor catering services for events or functions are also generally attracted to a GST rate of 18%

Q3: Is there a difference in the bill if I order through Swiggy or Zomato?

Yes, there can be a difference in the bill for your food if you order through Swiggy or Zomato. The GST rate of 5% remains the same, which is charged by the restaurant. The key difference highlights that if you order the food from an online platform (e-commerce operator), you will be charged 5% of the GST rate by the restaurant and remitting it to the government, but not the restaurant owner.

Q4: What is the 'service charge' on my bill? Or is it a government tax?

The service charge is not a government tax. It is an amount which is charged by the restaurant for the service they have provided to you. In simple terms, it is an income for them, which is like a tip. However, the government has made guidelines which outline that this charge is voluntary. You are not required to pay this charge if you are unsatisfied with the service.

Q5: Do I have to pay both Central GST (CGST) and State GST (SGST)?

Yes, you have to pay both Central GST (CGST) and State GST (SGST). It is applicable only if the sale of goods or services appears within the same state, which means (intra-state transaction). In such type of situations, your total GST will be split equally between CGST and SGST.