Most restaurants pay 5% GST with no input tax credit. But in some cases, 18% with ITC works out cheaper. Here is the complete guide to restaurant GST rates, Swiggy/Zomato rules, cloud kitchens, and composition scheme.
If you run a restaurant, you face a choice that most business owners do not: you can either pay GST at 5% and give up your input tax credit, or pay at 18% and claim ITC on everything you buy — raw materials, kitchen equipment, packaging, and more.
Most restaurant owners default to 5% because it looks simpler. But that default costs many restaurants money. If your ingredient costs and capital expenditure are high, 18% with ITC can leave you paying less net tax. This guide will show you exactly how to calculate which option benefits your restaurant.
We will cover: the 5% vs 18% choice, Swiggy and Zomato's separate GST obligations, cloud kitchen rules, catering GST, the composition scheme option for small restaurants, and how to set up compliant billing. If you are creating GST invoices for your restaurant today, use our free GST calculator to verify the right tax for any order value.
Both options are available to most restaurants. The right choice depends on your cost structure.
| Feature | Factor | 5% GST (No ITC) | 18% GST (With ITC) |
|---|---|---|---|
| GST rate charged to customer | 5% | 18% | |
| Input tax credit on purchases | Not allowed | Allowed on all inputs | |
| Who typically benefits | Low input cost restaurants | High capital, high ingredient cost restaurants | |
| Applicable to | Non-AC restaurants, standalone AC restaurants | AC restaurants in starred hotels, catering | |
| SAC code | 996331 | 996331 or 996334 (catering) | |
| GST on rent, electricity, equipment | Cannot claim back | Can claim back as ITC | |
| Customer invoice appearance | Lower tax line item | Higher tax line item | |
| Complexity | Simple — no ITC tracking | Higher — must maintain purchase records |
This is the question every restaurant owner should ask before choosing their GST rate. Let us work through a real example.
Scenario: Restaurant with monthly revenue of Rs 10 lakh
Assume the restaurant's input costs (ingredients, packaging, kitchen gas, equipment maintenance) total Rs 4 lakh per month, all subject to GST at 18%.
Under 5% (no ITC):
GST collected from customers: 5% of Rs 10 lakh = Rs 50,000
ITC available: Rs 0 (not allowed)
Net GST payable: Rs 50,000 per month
Under 18% (with ITC):
GST collected from customers: 18% of Rs 10 lakh = Rs 1,80,000
ITC on inputs: 18% of Rs 4 lakh = Rs 72,000
Net GST payable: Rs 1,80,000 - Rs 72,000 = Rs 1,08,000 per month
In this case, 5% is clearly better — the restaurant pays Rs 50,000 vs Rs 1,08,000. But now change the scenario:
Scenario 2: High-end restaurant with major renovation
Same Rs 10 lakh revenue. But this year the restaurant spent Rs 15 lakh on kitchen renovation (commercial equipment, fit-out). That renovation has Rs 2,70,000 of GST (18%) embedded in it — ITC that can only be claimed under the 18% scheme.
In the year of renovation, the ITC from Rs 2,70,000 in capital goods plus Rs 72,000 monthly ITC can offset a large portion of the 18% liability. If you are opening a new restaurant or doing major capital investment, run both calculations before committing to a rate structure. Use our GST calculator as a starting point, and consult your CA for the final decision.
The breakeven point is roughly when your GST-bearing inputs exceed 28% of your taxable turnover. Below that, 5% wins. Above that, 18% may win depending on your specific mix of inputs.
This confuses many restaurant owners. When a customer orders from Swiggy or Zomato, the GST rules changed significantly in January 2022 and remain in effect.
The current rule: Swiggy and Zomato (as Electronic Commerce Operators under Section 9(5) of the CGST Act) are required to collect and deposit GST on restaurant services supplied through their platforms. The restaurant does not collect GST on Swiggy/Zomato orders — the platform does.
This means: if you are a restaurant registered under the 5% scheme, your Swiggy and Zomato orders attract 5% GST — but Swiggy/Zomato collects it from the customer and remits it to the government. You receive the food value minus their commission. You do not add GST on top when billing Swiggy or Zomato for your services.
Important compliance point: Your restaurant still needs to report these orders in your GST return. The turnover from Swiggy/Zomato orders counts toward your aggregate turnover for GST registration purposes. If Swiggy/Zomato orders push you above Rs 20 lakh annual turnover, you must register for GST even if your dine-in revenue alone was below the threshold.
Delivery charges: If Swiggy or Zomato charges a delivery fee separately, that fee attracts 18% GST (transport service). The restaurant is not responsible for this — the platform handles it.
Cloud kitchens (also called dark kitchens or ghost kitchens) are food preparation facilities that only accept delivery orders — no dine-in service. The GST rules for cloud kitchens are stricter than for restaurants.
GST rate for cloud kitchens: 18% — The 5% option is not available to cloud kitchens. This is because the 5% rate with no ITC was designed for restaurant services where the customer consumes food on-premises or through a defined service relationship. Cloud kitchens, being purely production facilities, are classified differently under SAC 996331 with the 18% rate applying by default.
However, because cloud kitchens operate at 18%, they can claim full input tax credit on all inputs: packaging materials, cooking equipment, kitchen supplies, rent on the premises, electricity, and all other GST-bearing expenses. For a cloud kitchen with high input costs relative to revenue, the ITC benefit can significantly reduce the effective tax burden.
If you operate multiple brands from one cloud kitchen facility (multi-brand cloud kitchen), each brand's GST liability flows through the same GST registration. Ensure your invoice generator correctly assigns the SAC code 996331 and 18% rate to all cloud kitchen orders.
Catering services — whether you supply food for corporate events, weddings, parties, or institutional catering — always attract 18% GST with input tax credit available. There is no option to pay 5% on catering.
SAC code for catering: 996334 — Catering services provided at exhibitions, events, parties, conventions, and similar gatherings. This applies regardless of whether the food is prepared at the client's venue or brought from your kitchen.
Who counts as a caterer for GST? Any food service business that provides food and related services at a venue other than the service provider's own premises. If you run a restaurant and also take catering orders, you need to charge 5% (or 18%) on the dine-in portion and 18% on catering contracts — and issue separate invoices for each.
Institutional catering — supplying meals to factories, offices, schools, or hospitals on a contract basis — also falls under 18% GST with ITC. Many caterers running institutional meal programs find that the ITC on bulk raw material purchases meaningfully reduces their net tax outgo.
If you provide catering and restaurant services under one GST registration, you must maintain clear records separating the two types of supply. In myBillPlease, you can create separate item categories for restaurant vs. catering services, each with the correct SAC code and GST rate, so reports always separate the two correctly.
Small restaurants with turnover below Rs 1.5 crore can use the composition scheme as a simpler alternative
Annual aggregate turnover must be below Rs 1.5 crore (Rs 75 lakh for special category states). Restaurants in states like Uttarakhand, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Arunachal Pradesh have the lower limit.
Restaurants under composition pay 5% of turnover as GST — split equally as CGST 2.5% + SGST 2.5%. This is paid quarterly via Form CMP-08. Annual return filed in GSTR-4.
Composition dealers cannot issue GST invoices — only bills of supply. You cannot collect GST from customers separately. You cannot claim input tax credit. You cannot supply goods inter-state.
Very small restaurants with simple operations, minimal paperwork capacity, and predominantly local/dine-in customers. If you receive significant orders from aggregators like Swiggy/Zomato, composition may complicate things.
Instead of monthly GSTR-1 and GSTR-3B, composition dealers file CMP-08 quarterly and GSTR-4 annually. Far less compliance burden. Good for single-location small restaurants.
Your B2B customers cannot claim ITC on purchases from you. This makes composition restaurants unattractive to corporate clients who need proper GST invoices for their own ITC claims.
Restaurants must register for GST when their aggregate turnover exceeds Rs 20 lakh in a financial year. For restaurants in special category states (the northeastern states plus Himachal Pradesh and Uttarakhand), the threshold is Rs 10 lakh.
Aggregate turnover includes: All taxable sales (food, beverages), exempt sales, export sales. It excludes GST itself and inward supplies under RCM. So if your total restaurant revenue — dine-in plus takeaway plus delivery — crosses Rs 20 lakh in a year, you must register regardless of whether individual transaction amounts are small.
Mandatory registration below threshold: Even below Rs 20 lakh, if you make inter-state supplies (e.g., supplying packaged food to distributors in other states) you must register for GST from the first rupee. Similarly, if you supply through Swiggy or Zomato and your state has specific rules, confirm with your CA.
Voluntary registration: Restaurants below the threshold can voluntarily register for GST. This makes sense if you supply to corporate clients who need GST invoices for ITC, or if you want to claim ITC on major kitchen equipment purchases.
Once registered, you need to file monthly or quarterly returns depending on your turnover. For restaurants between Rs 20 lakh and Rs 5 crore, the QRMP scheme (Quarterly Return Monthly Payment) is available — file GSTR-1 and GSTR-3B quarterly but pay tax monthly.
We built myBillPlease to make restaurant billing compliance straightforward. You can set up your restaurant's GST rate once, and every invoice — whether dine-in, takeaway, or delivery — applies the correct rate and generates a compliant GST invoice automatically.
myBillPlease handles 5% and 18% restaurant invoicing automatically. Set your rate once, generate compliant GST bills for dine-in, takeaway, and delivery orders.
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