What GST rate applies to a standalone restaurant in India?

Most standalone restaurants are taxed at 5% GST on food and beverage service — 2.5% CGST plus 2.5% SGST — and cannot claim input tax credit on their purchases. That is the default bucket for a normal dine-in, takeaway or delivery outlet registered under the regular scheme. Confirm your own category with your CA, because the conditions attached to the rate are set by notification and do change.

When does a restaurant charge 18% GST instead of 5%?

18% with input tax credit applies to restaurant service supplied from specified premises — broadly, an outlet inside a hotel or similar accommodation unit where the declared room tariff crosses the threshold set in the GST rate notifications. If your outlet sits inside a hotel, or your group also sells accommodation, check this line by line with your CA before you set a rate in your POS.

Can I claim input tax credit at 5% GST?

No. The 5% rate for restaurant service is given on the condition that you do not take input tax credit, so the GST you pay on rent, groceries, packaging, gas and equipment stays a cost. That is why the 5% versus 18% question is not simply about which number is lower.

Is the composition scheme a third option for restaurants?

Yes. A small restaurant under the composition scheme pays a composition levy of 5% of turnover out of its own pocket, does not collect GST from the customer, cannot claim input tax credit, and issues a bill of supply rather than a GST tax invoice. Eligibility depends on your aggregate turnover, so treat it as a decision to take with your CA, not a setting to flip in software.

Restaurant GST Rate 2026: 5% vs 18% — Which Applies to Your Outlet?

This guide is general information written for restaurant owners, not tax advice. GST rates, thresholds and the conditions attached to them are set by notification and change. Confirm your own category with a qualified chartered accountant before you set a tax rate in your billing software, and check the current rate notifications on the CBIC GST portal at cbic-gst.gov.in.

The three buckets — pick yours first

Almost every argument about restaurant GST happens because two owners are in different buckets and don't realise it. Before you compare rates, work out which of these three describes your outlet.

Bucket	What you charge on the bill	Input tax credit	Document you issue
Regular scheme, standalone outlet	5% GST (2.5% CGST + 2.5% SGST)	Not available	GST tax invoice
Regular scheme, specified premises	18% GST (9% CGST + 9% SGST)	Available	GST tax invoice
Composition scheme	Nothing — no GST is collected from the guest	Not available	Bill of supply

Most single-outlet Indian restaurants are in row one. If that's you, the rest of this article is about confirming it and setting it up correctly, not about choosing.

Bucket 1: 5% without input tax credit

This is the default for restaurant service. You charge the guest 5%, split as CGST and SGST because a dine-in or local delivery supply happens inside your own state. IGST only shows up on genuinely inter-state supplies, which is rare for food service and more common on B2B catering.

The catch is in three words: without input tax credit. The 5% rate is conditional. In exchange for the low rate, you give up the credit on the GST you pay out — on rent, on groceries and packaging where the supplier charges GST, on your gas, your crockery, your equipment, your accountant's fee. That GST is a cost, not something you net off. Owners who came from a trading business and expect to offset input GST get an unpleasant surprise in month one.

So the honest way to read the two rates is not "5% is cheaper than 18%". It is: 5% means a low, simple, guest-friendly number on the bill and a slightly higher real cost base; 18% means a big number on the bill and a lower cost base. Which is better depends on your rent, your purchase mix and your price point. You do not get to choose freely, though — your bucket is determined by your premises, not your preference.

Bucket 2: 18% for specified premises

18% with ITC attaches to restaurant service supplied from specified premises. The idea is that food service sold alongside expensive hotel accommodation is treated differently from a standalone eatery. The test has historically turned on the declared tariff of rooms in the same premises crossing a threshold fixed in the rate notification, and the mechanics of that test have been amended more than once.

Two practical rules follow. First: if your outlet is inside a hotel, guest house, resort or serviced-apartment building — or if the same legal entity also sells accommodation — do not assume 5%. Get it confirmed. Second: because the definition and the threshold have moved, do not copy a rate off a blog post, including this one. Read the current notification, or have your CA read it, and record the date you checked. We deliberately do not quote a notification number or a tariff figure here, because publishing a stale one would cost a real owner real money.

Bucket 3: the composition scheme

A small restaurant can opt into the composition scheme. Then the arithmetic changes shape entirely. You pay a composition levy — 5% of turnover for restaurant service — out of your own pocket. You do not add GST to the guest's bill, you cannot claim input tax credit, and you must issue a bill of supply, not a tax invoice, carrying the declaration that you are a composition taxable person and not eligible to collect tax on supplies.

Eligibility is capped by aggregate turnover, and that cap has been revised. It also comes with its own filing rhythm, and B2B customers who want credit will not like buying from you. This is a CA conversation, not a software setting.

Set the rate once, get it right on every bill

NamastePOS lets you configure the GST rate and HSN/SAC per item, then applies the CGST/SGST split automatically from the place of supply. GST tax invoices with HSN per item are included from the Pro plan (₹799/mo); e-invoice formats start on Advanced (₹999/mo). Starter and Growth print plain invoices and receipts. 7-day free trial, no card.

Start free — ₹0

The four edge cases that actually come up

Alcohol

Alcoholic liquor for human consumption sits outside GST. It is taxed by your state under VAT or excise. So a bar bill can legitimately carry two different tax regimes on one piece of paper: GST on the food, state tax on the drinks. If your POS can only apply one tax to a whole bill, you have a problem — you need per-item tax configuration.

Packaged goods sold as-is

A sealed bottle of soft drink handed over the counter is not obviously the same supply as a cooked meal, and goods sold as-is versus food served as restaurant service is a place where owners get corrected during assessment. Ask your CA how to classify the packaged items on your menu, then tag them in your POS accordingly.

Aggregator orders

GST on restaurant service supplied through an e-commerce operator is generally paid by that operator rather than by you, which means your Zomato and Swiggy orders do not behave like your dine-in sales in your returns — even though they are real revenue in your reports. Map this once with your CA and the monthly routine becomes mechanical. We go into the money side of that in aggregator payout reconciliation.

Service charge

Service charge is not a tax. It is your own charge, not a government levy, and it must never be printed in a way that looks like GST. Guidance from consumer authorities on making it optional and clearly disclosed has been litigated, so treat it as a policy decision with signage, not a line buried in the tax block.

A two-minute decision run

Is your outlet inside, or part of the same entity as, an accommodation business? If yes, stop and ask your CA about specified premises and 18%.
Are you registered under the composition scheme? If yes, you issue a bill of supply and collect no GST.
Otherwise you are almost certainly 5% without ITC, split CGST + SGST for supplies in your own state.
Does your menu include alcohol or packaged goods? Configure those items separately, not at the food rate.
Write down the date you checked and the notification your CA relied on. Re-check at least once a year and after any GST Council announcement.

Make your software carry it, not your memory

Whatever your rate, the failure mode is the same: it gets applied inconsistently. A rate typed by hand at the counter, a rate that a new cashier guesses, a rate that lives in one person's head. The fix is to store the tax rate and the HSN/SAC against each menu item once, let the software decide CGST/SGST versus IGST from the place of supply, and let it keep the invoice series gap-free. Then your monthly job is to export the GST summary and hand it over, and your GST billing routine becomes review-and-submit rather than re-keying.

Two more things worth doing while you are in there. Check that every field a tax invoice must legally show is actually on your printed bill — our restaurant bill format guide walks the fields one by one. And if your turnover is heading toward the e-invoice threshold, get on e-invoice-ready software before you cross it, not after. The current threshold is published on the GST portal at gst.gov.in.

Rates change. Your setup shouldn't need rebuilding when they do. That is the whole argument for keeping the rate as configuration rather than a habit: when the Council moves a number, you change one field, not a thousand bills.