---
title: "GST for Restaurants 2026: 5% Without ITC vs 18% With ITC Rules"
description: "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."
author: "Himanshu"
published: 2026-03-25T07:51:53.000Z
updated: 2026-09-06T05:37:37.479Z
url: https://blog.mybillplease.com/gst-for-restaurants
---
# GST for Restaurants 2026: 5% Without ITC vs 18% With ITC Rules

## Key takeaways

- Standalone restaurants choose between 5% GST without ITC and 18% with full ITC; starred-hotel restaurants, cloud kitchens and caterers must charge 18%.
- The breakeven is roughly when GST-bearing inputs exceed 28% of taxable turnover; below that, 5% usually wins.
- Swiggy and Zomato collect and deposit GST on platform orders under Section 9(5), but that turnover still counts toward your registration threshold.
- The composition scheme taxes restaurants at 5% of turnover with quarterly CMP-08 filing, but blocks ITC and GST invoices.

## Restaurant GST: The Two-Rate Choice

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](https://www.mybillplease.com/tools/gst-calculator) to verify the right tax for any order value.

## 5% vs 18% GST for Restaurants: Side-by-Side
Both options are available to most restaurants. The right choice depends on your cost structure.
| 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 |

## When Does 18% + ITC Beat 5%? The Calculation

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](https://www.mybillplease.com/tools/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.

## Swiggy and Zomato: Who Collects GST on Delivery Orders?

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.

> **Platform orders still count toward your turnover**
> 
> 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: 18% GST, No Choice**
> 
> 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](https://www.mybillplease.com/tools/invoice-generator) correctly assigns the SAC code 996331 and 18% rate to all cloud kitchen orders.

## Catering Services: Always 18% GST

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](https://www.mybillplease.com/signup), 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.

## Composition Scheme for Restaurants: Should You Opt In?
- **Eligibility** — 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.
- **Tax Rate Under Composition** — 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.
- **What You Cannot Do** — 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.
- **Who Benefits** — 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.
- **Filing Simplicity** — 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.
- **The Catch** — 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.

## GST Registration for Restaurants: Threshold and Process

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](https://www.mybillplease.com/signup) 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.

**Restaurant GST Billing — Set Up in 5 Minutes**
myBillPlease handles 5% and 18% restaurant invoicing automatically. Set your rate once, generate compliant GST bills for dine-in, takeaway, and delivery orders.

[Start Free](/signup)

## FAQ

### Can a restaurant choose between 5% and 18% GST?

Most restaurants can choose between 5% GST without input tax credit and 18% GST with full input tax credit. The 5% option is available to standalone restaurants (both AC and non-AC) and non-star hotel restaurants. Restaurants within starred hotels (3-star and above) are required to charge 18% GST. Cloud kitchens and catering services are mandatorily at 18%. If you are a standalone restaurant, the right choice depends on your input cost ratio — calculate both options before deciding. Change of option is typically made at the beginning of a financial year.

### What GST rate does Swiggy or Zomato charge on restaurant orders?

Swiggy and Zomato, as Electronic Commerce Operators, are responsible for collecting and depositing GST on restaurant services supplied through their platforms under Section 9(5) of the CGST Act. The restaurant's applicable GST rate (5% for most standalone restaurants) applies to the order value. The platform collects it from the customer and remits it to the government. The restaurant does not separately collect or remit GST on these orders but must include this turnover in its aggregate turnover for registration and return purposes.

### What is the GST rate for cloud kitchens in 2026?

Cloud kitchens pay GST at 18% under SAC code 996331. The 5% no-ITC option is not available to cloud kitchens because they do not provide dine-in restaurant services. Since cloud kitchens are at 18%, they can claim input tax credit on all GST-bearing inputs including packaging, kitchen equipment, cooking supplies, electricity bills, and rent. For cloud kitchens with significant input costs, this ITC can substantially reduce the net GST payable. All invoices from a cloud kitchen must show 18% GST with the SAC code 996331.

### What SAC code applies to restaurant services?

Restaurant and food serving services use SAC code 996331 — services provided by restaurants, cafes, and similar eating facilities. Catering services use SAC code 996334, which covers food supply at events, parties, conventions, and institutional settings. If you supply food through delivery-only operations (cloud kitchen model), use SAC 996331 with 18%. If you operate a hotel and serve food, room service uses SAC 996332. Always check the specific SAC for your service type, as wrong SAC codes can attract scrutiny during GST audits.

### Is GST applicable on water and beverages served at restaurants?

At a restaurant, beverages are typically part of the overall food service supply and are taxed at the restaurant's applicable rate (5% or 18%). However, if beverages like packaged bottled water, aerated drinks, or alcohol are sold separately (not as part of a meal), different rates apply. Packaged bottled water sold separately attracts 18% GST. Alcoholic beverages are outside the GST framework — they attract state excise duties, not GST. If your restaurant serves alcohol, the food portion is GST-liable but the alcohol portion is subject to state excise, and you typically need a separate liquor license and bill.

### Can a restaurant claim ITC on kitchen renovation and equipment under the 5% scheme?

No. Under the 5% GST scheme for restaurants, input tax credit is not available on any purchases — including capital goods like kitchen equipment, refrigerators, ovens, renovation costs, or even raw ingredients. This is the core trade-off of the 5% scheme. If you are planning a major kitchen renovation or opening a new restaurant with significant capital investment, seriously evaluate the 18% scheme. The ITC on capital goods under the 18% scheme can be claimed over a period of time and can offset a meaningful portion of the higher GST outgo from customers.

### What is the GST rate for restaurant services in a starred hotel?

Restaurants located within hotels that charge Rs 7,500 or more per night for rooms (typically 3-star, 4-star, and 5-star hotels) must charge 18% GST on food and beverages, regardless of whether the restaurant itself has air conditioning. This 18% rate applies to all food served in such hotels — dining hall, room service, banquets, and poolside. The distinction is based on the declared tariff of the hotel, not the category of the restaurant within it. These restaurants can claim full input tax credit since they are in the 18% bracket.