GST Billing for Restaurants: Why You Cannot Choose 18%

Almost every restaurant in India charges 5% GST with no input tax credit. That is the short answer, and the part owners find hardest to accept is that it is not a choice. You cannot opt into 18% to claim credit on your rent and your raw material.

The 18% rate exists, but only for restaurants inside certain hotel premises. If you run a standalone outlet, a cloud kitchen, or a cafe in a mall, the 5% rate is simply what applies to you.

This guide covers which rate applies where, what the September 2025 GST changes did and did not touch, what has to appear on your bill, and how your POS keeps the tax right.

Key Takeaways

• The 5% rate comes with no input tax credit. GST on rent, equipment, and raw material is a cost you absorb, not something you set off.
• A standalone restaurant cannot elect to pay 18%. The GST Council put that beyond argument in September 2025.
• The 18% rate follows the premises, not your preference. It applies where hotel accommodation above ₹7,500 a night was supplied, or where the hotelier has declared the premises specified.
• September 2025 left restaurant rates alone. The rate cut that year was on hotel rooms, not on food.
• Alcohol is outside GST entirely. A bar bill runs two tax regimes at once, so your billing has to keep them apart.
• Composition changes your bill, not just your rate. You issue a bill of supply and cannot collect any tax from the customer.

What Should You Check First?

Four things settle almost every GST billing question a restaurant has.

1. Find out if your premises is “specified”. It is about hotel accommodation on the premises, not about your food or your turnover.
2. Accept the ITC position. On 5%, input tax credit is off the table, so price with that in mind rather than planning to recover it.
3. Check the GST rate on every menu item. Your bill carries whatever the menu is set to, and a wrong slab repeats on every sale.
4. Know who bills the aggregator orders. For Swiggy and Zomato, the answer is not you.

What GST Rate Does a Restaurant Charge?

Two rates exist for restaurant service, and which one you use depends entirely on where you operate. The CBIC’s guidance on specified premises sets both out against Notification 11/2017-CTR.

“Outside specified premises… the rate of 5% without ITC is applicable as per entry 7(ii)”, says the CBIC. Entry 7(vi) carries the 18% with ITC for restaurant service at specified premises.

So everything turns on one question, and it is not a question about your food.

What Makes a Premises “Specified”?

Since 1 April 2025, the main test is a premises from which hotel accommodation was supplied at more than ₹7,500 per unit per day in a financial year. That premises is then specified for the following year.

There is a second route. A supplier of hotel accommodation can also declare its premises specified for a year, even where its rooms sit below ₹7,500. That option belongs to the hotelier alone.

Read the test carefully, because it looks at the rooms, not the restaurant. As an example, a hotel in Vastrapur whose best room went for ₹8,200 a night last year would make its in-house restaurant an 18% one this year. The dosa counter across the road stays at 5%.

Why Does Alcohol Sit Outside GST?

Because the Constitution leaves it out. Alcoholic liquor for human consumption is not covered by GST at all, and Schedule II of the CGST Act excludes it in the same breath as it defines food service.

Liquor carries state excise and VAT instead. That means a bar bill runs two tax regimes at once: 5% GST on the food, state VAT on the drinks, at rates your state sets.

The practical consequence sits in your billing. A bar or brewery cannot sweep the whole docket into 5%, so the POS has to hold two tax treatments side by side and report them separately.

Why Can You Not Choose 18% With ITC?

Owners ask this constantly, usually after totting up the GST they pay on rent. The option was never yours to take, and in September 2025 the GST Council said so in terms.

The Council recommended adding Explanations to the definition of specified premises “to clarify the position that a stand-alone restaurant cannot declare itself as a ‘specified premises’ and consequently cannot avail the option of paying GST at the rate of 18% with ITC”.

The declaration that turns a premises into a specified one can only be filed by someone supplying hotel accommodation. As the CBIC puts it, anyone “not supplying/intending to supply hotel accommodation service cannot file this declaration”. A mall owner cannot file it for the restaurants in his mall. A restaurant cannot file it for itself.

That leaves 5% as a fact of your cost structure rather than a decision to revisit. Price your menu knowing the GST on your inputs stays with you.

What Changed for Restaurant GST in September 2025?

Plenty changed in GST that month, which is why this question keeps coming up. For your food bill, the answer is: nothing.

The 56th GST Council rebuilt the slabs into “a 2 rate structure with a Standard Rate of 18% and a Merit Rate of 5%”, plus a 40% rate for a select few goods and services, all effective from 22 September 2025. Restaurant service rates were not among the changes.

What did move was hotel accommodation. Rooms at or below ₹7,500 per unit per day went from 12% with ITC to 5% without ITC. That is a room rate, not a food rate, and it does not change what you charge a diner.

The one restaurant-facing change was the clarification covered above. So if someone tells you restaurant GST changed in September 2025, they have read the room news and filed it under food.

What Must Appear on a Restaurant GST Bill?

Rule 46 of the CGST Rules lists what a tax invoice has to carry. For a restaurant, the practical points are short.

Your own GSTIN, invoice number and date, and the tax charged all have to be on it. The rate is shown split into CGST and SGST for a sale inside your state, which is what almost every restaurant bill is.

The customer’s details only come in when they are registered. Rule 46 requires the “name, address and Goods and Services Tax Identification Number… if registered, of the recipient”. For an unregistered diner spending under ₹50,000, you record their details only if they ask.

There is a relaxation, but it is narrower than it sounds. Section 31(3)(b) lets you skip a tax invoice only where the value supplied is less than ₹200, the customer is unregistered, and they do not want one. You then issue a consolidated tax invoice at the close of the day.

Almost every restaurant bill clears ₹200, so this helps a tea counter rather than a dining room. Do not read it as permission to stop invoicing normal covers.

Who Charges GST on a Swiggy or Zomato Order?

Not you. Since 1 January 2022, restaurant service supplied through an e-commerce operator is notified under Section 9(5), so the aggregator pays the GST and issues that bill to the diner.

The CBIC circular is direct: “The invoice in respect of restaurant service supplied through ECO under section 9(5) will be issued by ECO.”

You still report them. The supplier reports these in Table 14(b) of GSTR-1, and the GSTN advisory confirms those values are “auto-populated to Table 3.1.1(ii) of GSTR-3B“. Older guidance pointing to Table 3.1(c) predates the tables being added in 2022.

The commission the aggregator charges you is a separate matter. That is their own service to you, billed on their own invoice, and it carries its own GST. On the 5% rate you cannot claim credit for that tax either, so it sits alongside your rent as a cost.

One thing not to miss: those aggregator sales still count in your aggregate turnover for every threshold in the Act. They shrink your billing work, not your numbers.

An Example of the Rate Split

The following is an example, not a real client. Picture a 60-cover restaurant in Koramangala running a dine-in floor and a cloud-kitchen brand from the same address, doing ₹3.4 crore a year.

It is not inside a hotel, so nothing it sells carries 18%. Dine-in bills go out at 5% without ITC. Its Swiggy orders are billed by the aggregator, not by it. The GST it pays on rent, on the chimney it bought in February, and on its vegetable purchases is simply a cost.

The example is invented, but the shape is the common one: a single rate, no credit, and a chunk of orders it does not bill at all.

How Does Your POS Handle GST Billing?

The tax on a bill is only as good as the tax on the menu behind it. On Petpooja POSS, GST setup is a gate rather than a setting: the Menu module cannot be opened until an outlet either configures its GST slabs or confirms it is not registered under GST.

That sounds strict until you have seen an outlet bill for a month on the wrong slab. Forcing the choice up front stops an outlet from quietly running with no tax at all.

From there, the tax rides with the sale into the reports your accountant needs. A Tax Report: Item Wise covers tax on everything sold, an HSN Report gives the HSN-wise bifurcation, and Tax Bifurcation: Category Wise breaks it down per category. Those feed your GST return filing without anyone re-adding a day’s bills.

If your books sit in Tally, the same figures can flow across through Tally integration instead of being typed twice.

Conclusion

For nearly every restaurant, GST billing is simpler than the debate around it. You charge 5%, you do not claim input tax credit, and neither part is negotiable. The 18% rate belongs to restaurants inside hotel premises that cross ₹7,500 a night on rooms.

September 2025 did not disturb any of that. It cut the rate on hotel rooms and closed off the argument that a standalone restaurant might declare itself into 18%.

What is left is execution: right slab on every item, right details on the bill, and reports your accountant can file from. To see how that runs on your outlet, the Petpooja POSS team can walk you through it. Rates do change, so confirm your own position with your CA.

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