Restaurants in India are subject to Goods and Services Tax (GST) at the rate of 5% without Input Tax Credit (ITC) or 18% with ITC, depending on the type of restaurant and the composition scheme chosen. The GST rate for restaurants is applicable on the supply of food and beverages.
GST Rates for Restaurants
The GST rates for restaurants are as follows:
| Restaurant Type | GST Rate without ITC | GST Rate with ITC |
|---|---|---|
| Non-AC Restaurants | 5% | 18% |
| AC Restaurants | 5% | 18% |
| Cloud Kitchens | 5% | 18% |
Input Tax Credit (ITC) for Restaurants
Restaurants can claim ITC on the input goods and services used in the supply of food and beverages. However, the ITC can only be claimed if the restaurant is paying GST at the rate of 18%.
Composition Scheme for Restaurants
The composition scheme is an optional scheme for small restaurants with an annual turnover of up to ₹1.5 crore (verify the current figure). Under this scheme, the restaurant pays a fixed rate of 5% GST without ITC.
- Eligibility: Restaurants with an annual turnover of up to ₹1.5 crore
- Benefits: Simplified compliance, lower tax rate
- Limitations: No ITC, limited to specific states
The choice between the 5% GST rate without ITC and the 18% GST rate with ITC depends on the restaurant's business model and input costs. Restaurants with high input costs may benefit from claiming ITC, while those with low input costs may prefer the 5% GST rate without ITC.
Aggregators and Cloud Kitchens
Aggregators like Zomato and Swiggy are required to collect and pay GST on the supply of food and beverages by cloud kitchens and other restaurants. Cloud kitchens are also required to pay GST on their supplies.
Frequently Asked Questions
What is the GST rate for non-AC restaurants?
The GST rate for non-AC restaurants is 5% without ITC or 18% with ITC.
Can restaurants claim ITC on input goods and services?
Yes, restaurants can claim ITC on input goods and services used in the supply of food and beverages, but only if they are paying GST at the rate of 18%.
What is the composition scheme for restaurants?
The composition scheme is an optional scheme for small restaurants with an annual turnover of up to ₹1.5 crore, under which they pay a fixed rate of 5% GST without ITC.
The bottom line
Restaurants in India are subject to GST at the rate of 5% without ITC or 18% with ITC, depending on the type of restaurant and the composition scheme chosen. It is essential for restaurants to understand the GST rates, ITC, and composition scheme to ensure compliance and minimize tax liability.
This is general information, not professional advice — confirm the current position for your specific case before acting.
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