India scrapped its separate service tax on restaurants on July 1, 2017, when the Goods and Services Tax replaced the older indirect taxes.1GST Council. About Us Archive What you now pay on a restaurant bill in India is GST, and for almost every eatery the rate is a flat 5% on the food total. The main exception is dining at a restaurant inside a hotel whose published room tariff is ₹7,500 or more per night, where the rate jumps to 18%.2GST Council. GST on Hotel and Restaurant Services – Section: Rate of Tax on Hotel and Restaurant Services Alcohol on the same bill is taxed separately under state laws, not GST.
The Standard 5% Rate
Air-conditioned or not, licensed to serve alcohol or not, fine-dining or roadside, standalone restaurants charge 5% GST on your food. The rate covers dine-in, takeaway, and parcel orders equally.2GST Council. GST on Hotel and Restaurant Services – Section: Rate of Tax on Hotel and Restaurant Services The uniform rate was set through amendments to Notification No. 11/2017-Central Tax (Rate) and has held steady since late 2017.
There is a trade-off built into that 5%. Restaurants at this rate cannot claim Input Tax Credit, so the GST they pay on ingredients, rent, and kitchen equipment sits on their books instead of being offset against what they collect from you.2GST Council. GST on Hotel and Restaurant Services – Section: Rate of Tax on Hotel and Restaurant Services The design goal was to keep menu prices lower for everyday diners.
The 18% Hotel Rate
Eat at a restaurant inside a hotel where any room is priced at ₹7,500 or more per night, and your food bill carries 18% GST rather than 5%.2GST Council. GST on Hotel and Restaurant Services – Section: Rate of Tax on Hotel and Restaurant Services The test is the published room tariff, not the discounted rate a particular guest actually paid. Hotel restaurants in this bracket are allowed to claim Input Tax Credit, which partly offsets the higher rate for the business.
If the same hotel’s room tariff sits below ₹7,500, its restaurant follows the standard 5% rate without ITC, exactly like a standalone eatery.2GST Council. GST on Hotel and Restaurant Services – Section: Rate of Tax on Hotel and Restaurant Services
Food Delivery Orders
Order through Swiggy, Zomato, or a similar app, and the GST on your food is still 5%. What changed in January 2022 is who collects it. Under Section 9(5) of the CGST Act, food delivery platforms are treated as the deemed supplier of restaurant services, so the app collects the 5% from you and remits it to the government rather than the restaurant doing so.3Central Board of Indirect Taxes and Customs. New Table 3.1.1 in GSTR-3B for Reporting Supplies Notified Under Section 9(5)
Cloud kitchens that cook only for delivery follow the same 5% rate without ITC. From the customer side, nothing about the amount changes. The platform’s commission to the restaurant is taxed separately at 18%, but that is charged to the restaurant, not to you, though it can filter into menu pricing on the app.
Alcohol on the Same Bill
Alcoholic drinks for human consumption were deliberately kept out of GST. Your cocktails, beer, and wine are taxed under state excise duties and Value Added Tax, and both vary from state to state. That means a restaurant bill that includes drinks is really running under two tax regimes at once: GST at 5% (or 18% in a qualifying hotel) on food, and state VAT plus excise on the alcohol.
Restaurants that serve alcohol have to keep separate accounts for the two categories. On your bill, GST should appear only against the food subtotal, and state tax only against the drinks subtotal. If a bill applies GST to the alcohol portion as well, that is an error worth raising before you pay.
Service Charge Is Not a Tax
The “service charge” some restaurants add, usually 5% to 10% of the food bill, is not a government levy. It is money the restaurant adds at its own discretion, typically described as going to staff. The Central Consumer Protection Authority issued guidelines on July 4, 2022, stating that service charges cannot be made compulsory.4Department of Consumer Affairs. Mandatory Levy of Service Charge by Restaurants Violates Consumer Law
Under those guidelines, a restaurant cannot add service charge automatically, cannot refuse you entry or service for declining it, and cannot apply GST on top of the service charge amount. If it appears on your bill, you can ask for it to be removed before paying, and the restaurant is required to make clear that it is voluntary.4Department of Consumer Affairs. Mandatory Levy of Service Charge by Restaurants Violates Consumer Law A tip you choose to leave separately carries no GST.
Why Some Small Restaurants Show No Tax
Small restaurants and cafés with annual turnover up to ₹1.5 crore can opt into the Composition Scheme under Section 10 of the CGST Act.5Central Board of Indirect Taxes and Customs. CGST Act Section 10 – Composition Levy A composition-scheme restaurant pays a flat 5% (2.5% CGST plus 2.5% SGST) on its turnover, but it is not allowed to collect that tax from you.6Central Board of Indirect Taxes and Customs. Frequently Asked Questions on Composition Levy – Section: Q 2 The business absorbs the tax out of its own revenue. That is why a bill at a small local eatery may show no separate GST line at all, even though the establishment is fully compliant. Such businesses also cannot claim Input Tax Credit and are barred from inter-state sales or selling through e-commerce platforms that collect tax at source.
Below a lower threshold, a restaurant does not need to register for GST at all: the trigger is aggregate annual turnover of ₹20 lakh in most states, or ₹10 lakh in special category states.7Central Board of Indirect Taxes and Customs. Frequently Asked Questions – CBIC GST Very small eateries operating below those numbers legitimately charge no GST.