RestaurantsFood Delivery

GST on Restaurants & Food Delivery — 5% No ITC, Platform Collection

Complete GST guide for restaurants & food delivery: flat 5% without ITC on all restaurant food, hotel restaurant dual-rate (5%/18%), Zomato/Swiggy platform collection mechanism, cloud kitchen classification, outdoor catering 18% with ITC, alcohol exclusion from GST, and food aggregator commission taxation.

5%

Non-AC Restaurant

5%

AC Restaurant

18%

Hotel (room >₹7,500)

5%

Food Delivery (Zomato/Swiggy)

5%

Cloud Kitchen

18%

Outdoor Catering

5%

Takeaway Food

State Excise

Alcohol (outside GST)

Restaurants & Food Delivery — GST Framework

Restaurant Services — Flat 5% (No ITC)

ALL RESTAURANTS: Since 15 November 2017, all stand-alone restaurants (AC or non-AC) pay 5% GST without Input Tax Credit. This includes: Dine-in at any restaurant: 5%. Takeaway/parcel food: 5%. Fast food chains (McDonald's, KFC, Domino's): 5%. Fine dining restaurants: 5%. Cafes (Starbucks, CCD): 5%. Bakeries selling food: 5%. Sweet shops (Haldiram's, Bikanervala): 5%. Food courts in malls: 5%. Dhaba/roadside eatery (if registered): 5%. WHY NO ITC: Before Nov 2017: AC restaurants charged 18% WITH ITC. After Nov 2017: reduced to 5% WITHOUT ITC. Rationale: 5% flat rate is simpler, prevents restaurants from charging 18% and claiming inflated ITC. IMPACT: Restaurant can't claim ITC on rent (18%), equipment (18%), interiors (18%), supplies (18%). Effective cost higher than 5% suggests — but consumer pays less. TURNOVER BELOW ₹20L: No GST registration required. Can operate without collecting GST. Composition scheme (₹20L-₹1.5Cr turnover): 5% rate anyway, with even simpler compliance.

Hotels & Restaurants in Hotels — 5% or 18%

RESTAURANT IN HOTEL: The rate depends on DECLARED ROOM TARIFF of the hotel — not the food bill. Room tariff ≤ ₹7,500/night: restaurant charges 5% GST (no ITC). Room tariff > ₹7,500/night: restaurant charges 18% GST (WITH ITC). EXAMPLES: Budget hotel (OYO, Treebo — ₹1,500/night): restaurant in hotel = 5%. Mid-range hotel (Lemon Tree — ₹4,000/night): restaurant = 5%. Premium hotel (Taj, Oberoi — ₹15,000/night): restaurant = 18% WITH ITC. Same food item, different GST — only because hotel room rate differs! DECLARED TARIFF: Based on published rack rate — not actual booking rate. If hotel's published rate is ₹8,000 but guest books at ₹5,000 (discount), restaurant still charges 18%. ROOM SERVICE: Same rate as hotel restaurant — 5% or 18% based on room tariff. Mini-bar items: same rate as restaurant. BANQUET/CONFERENCE: If in hotel with tariff >₹7,500: 18%. If below: 5%. IMPORTANT: Guest staying in room — restaurant bill is SEPARATE from room bill. Room: 12% GST (₹1,001-₹7,500 tariff) or 18% (above ₹7,500). Restaurant (in same hotel): 5% or 18% (as above). Different rates on same invoice — hotel must split.

Food Delivery Apps — 5% Collected by Platform

ZOMATO/SWIGGY AS TAX COLLECTOR: From 1 January 2022: Zomato, Swiggy, and other food delivery platforms collect 5% GST from customers and deposit directly to government. Before Jan 2022: restaurant was liable to pay GST. After Jan 2022: PLATFORM is liable (as 'deemed supplier'). MECHANICS: Customer orders ₹500 food on Swiggy. GST = ₹25 (5% of ₹500). Swiggy collects ₹525 from customer. Swiggy deposits ₹25 GST to government. Restaurant receives ₹500 (minus Swiggy's commission). RESTAURANT'S OBLIGATION: Restaurant still needs GST registration (if above ₹20L threshold). But: restaurant does NOT collect GST on platform orders — Swiggy/Zomato already collected it. Restaurant reports these as 'supplies through e-commerce' in GSTR-1. Restaurant can set off this GST against its own liability. COMMISSION CHARGED BY PLATFORM: Swiggy/Zomato charge 20-30% commission to restaurant. GST on commission: 18% (it's a service). Restaurant pays 18% GST on commission fee — but CANNOT claim ITC (because restaurant is under 5% no-ITC scheme). DELIVERY CHARGE: Delivery fee charged to customer: 18% GST (it's a separate service). But: most platforms bundle it — dispute on whether delivery charge should be 5% (part of food) or 18% (separate transport). Current practice: platforms treat delivery as part of restaurant service = 5%.

Cloud Kitchens — 5% GST (No ITC)

CLOUD KITCHEN / GHOST KITCHEN: Cloud kitchens (Rebel Foods/Faasos, Box8, Freshmenu): only delivery, no dine-in. GST rate: 5% without ITC (classified as 'restaurant service'). Rationale: CBIC clarified — 'cooking and supply of food' is restaurant service regardless of whether there's a physical dining space. CLASSIFICATION BATTLE: Cloud kitchens argued: 'We're a food manufacturer — should be 5% on food goods with ITC'. Government view: 'You prepare and serve food (even via delivery) = restaurant service = 5% no ITC'. AAR rulings: consistently held cloud kitchens = restaurant service. FRANCHISE MODEL: Many cloud kitchens operate multiple brands from one kitchen: Rebel Foods operates: Faasos (wraps), Behrouz (biryani), Oven Story (pizza), Mandarin Oak (Chinese). Each brand = not separate entity for GST. One kitchen, one GST registration — all sales at 5%. CORPORATE CATERING BY CLOUD KITCHEN: Daily meal boxes to corporate offices: could be 'outdoor catering' = 18%. But: if supplied as 'restaurant service' (packaged individual meals): 5%. DISTINCTION MATTERS: Cooking + individual packaging + delivery = 5% (restaurant). Cooking + bulk supply + serving at client location = 18% (outdoor catering). PLATFORM ORDERS: Cloud kitchen orders via Swiggy/Zomato: platform collects 5% (same as any restaurant).

Outdoor Catering & Event Food — 18%

OUTDOOR CATERING — 18% WITH ITC: Outdoor catering (events, weddings, parties): 18% GST with full ITC. This is DIFFERENT from restaurant service (5% no ITC). WHAT IS OUTDOOR CATERING: Cooking food + serving at a venue chosen by customer. Wedding catering: 18%. Corporate event catering: 18%. Party catering at farmhouse: 18%. Conference/seminar food service: 18%. Institutional catering (hospitals, hostels — if contract-based): 18%. KEY DISTINCTION: Customer comes to restaurant = 5%. Caterer goes to customer's venue = 18%. Same food, different classification, different rate! BUNDLED SERVICES (wedding catering + tent + decor): If single invoice for catering + decoration + tent + sound: 18% on entire amount (composite supply — principal supply is catering). If separate invoices: catering 18%, tent rental 18%, decoration 18%. CANTEEN SERVICES: Company canteen managed by caterer (Sodexo, Compass Group): 18% (outdoor catering — caterer supplying at client premises). Factory canteen (mandatory under Factories Act): still 18%. But: employer may bear GST cost — effective rate to employee: nil. INDIAN RAILWAYS CATERING (IRCTC): Pantry car food: 5% (classified as restaurant service — train is the 'premises'). Platform food stalls: 5%. Base kitchen supply to trains: 18% (supply of goods, not restaurant service). Jan Ahaar (economy meals): 5%.

Alcohol, Tobacco & Related — Outside / High GST

ALCOHOL — OUTSIDE GST: Alcoholic beverages: COMPLETELY OUTSIDE GST (like petrol). Tax: State Excise Duty + State VAT. Rate varies by state: 25-75% effective tax. Restaurants serving alcohol: alcohol portion on bill = NO GST (state excise). Food portion = 5% GST. Hotel restaurant: food = 5%/18%, liquor = state excise. Bar/pub: same split — food 5%, alcohol state excise. CHALLENGE: How to split bill? CBIC guidance: if composite bill, split proportionally or as per menu pricing. TOBACCO — HIGHEST GST: Cigarettes: 28% GST + Compensation Cess (upto 290% of retail price for premium). Total effective tax: 50-80% on cigarettes. Gutka/pan masala: 28% + high cess. Hookah tobacco (served in restaurants): 28% + cess on tobacco. Service of serving hookah: 18% (separate service). Restaurant serving shisha: must split — tobacco component (28% + cess) + service (18%). ENERGY DRINKS (served in restaurant): Red Bull, Monster: 28% GST + 12% cess (aerated beverages with added sugar). But: when served as part of restaurant meal — 5% overall? DISPUTE: If restaurant serves Red Bull can: it's supply of goods = 28% + cess? Or part of restaurant service = 5%? AAR ruling: if served sealed can = supply of goods (28%). If mixed into cocktail (mocktail) = part of restaurant supply (5%).

Restaurants & Food Delivery — GST Rate Table

ItemHSN/SACGST RateNotes
Restaurant food (any restaurant)SAC 99635%No ITC
Takeaway/parcel foodSAC 99635%Same as dine-in
Hotel restaurant (room ≤₹7,500)SAC 99635%No ITC
Hotel restaurant (room >₹7,500)SAC 996318%With ITC
Food delivery (Zomato/Swiggy)SAC 99635%Platform collects
Cloud kitchenSAC 99635%No ITC — restaurant service
Outdoor catering (events)SAC 996318%With ITC
Indian Railways food (pantry)SAC 99635%No ITC
Sweetmeats/namkeens (pre-packaged)1704/21065-12%Depends on packaging
Aerated drinks with sugar220228% + 12% cessServed sealed
Bottled drinking water220118%Packaged
Alcoholic beveragesN/AOutside GSTState excise + VAT

Frequently Asked Questions

Why do restaurants charge 5% GST without ITC — and how does this affect pricing?
THE 5% NO-ITC STORY: BEFORE November 2017: AC restaurants: 18% GST WITH full ITC. Non-AC restaurants: 12% GST WITH full ITC. Restaurants claimed ITC on rent, equipment, interiors, raw materials, packaging — and passed benefit to customer (in theory). PROBLEM: Many restaurants charged 18% but didn't pass ITC benefit. Effective tax to consumer was high. Anti-profiteering complaints piled up. AFTER November 2017: ALL restaurants: flat 5% WITHOUT ITC. IMPACT ON RESTAURANTS: (1) Restaurant pays 18% GST on: rent (₹2L/month → ₹36,000 GST), interiors/renovation (₹50L → ₹9L GST), equipment (ovens, refrigerators — 18%), raw materials from registered dealers (5-18%), packaging (18%), services (accounting, legal — 18%). (2) Restaurant collects: 5% from customers. (3) Restaurant CANNOT offset input GST against output. (4) Net effect: all input GST becomes COST → built into food pricing. PRICING REALITY: Before: Biryani ₹300 + 18% GST = ₹354. ITC offset → restaurant's effective cost lower. After: Biryani ₹350 + 5% GST = ₹367.50. No ITC → restaurant increased base price to absorb input costs. Consumer sees 'lower GST rate' but pays similar total. BENEFICIARIES: Small restaurants (low input costs): 5% is genuinely lower. Premium restaurants (high rent, expensive interiors): hurt by no ITC. Restaurant chains (centralized procurement): SIGNIFICANTLY hurt — their ITC was ₹crores per year.
How does GST work when Zomato/Swiggy delivers food — who pays what to whom?
FOOD DELIVERY GST FLOW (Post Jan 2022): SCENARIO: Customer orders ₹500 meal from Restaurant X via Swiggy. STEP 1 — CUSTOMER PAYS: Food: ₹500. GST (5%): ₹25. Delivery charge: ₹30. GST on delivery: Bundled into 5% (current practice). Total paid by customer: ₹555. STEP 2 — SWIGGY COLLECTS & DEPOSITS GST: Swiggy collects ₹25 GST (5% of food value). Swiggy deposits ₹25 to government as TCS (Tax Collected at Source) — actually, it's NOT TCS but 'deemed supplier' liability. Swiggy files GSTR-1 showing this supply. STEP 3 — RESTAURANT RECEIVES: Restaurant receives: ₹500 − Swiggy commission (say 25% = ₹125) = ₹375. Restaurant's GST liability on this order: ₹25 (but SWIGGY already paid it). Restaurant shows in GSTR-1 as 'supply through ECO' and takes credit for GST paid by platform. STEP 4 — COMMISSION GST: Swiggy charges restaurant ₹125 commission + 18% GST = ₹147.50. Restaurant pays ₹22.50 GST on commission — BUT cannot claim ITC (5% no-ITC scheme). So ₹22.50 is PURE COST to restaurant. NET POSITION OF RESTAURANT: Revenue: ₹500. Minus Swiggy commission: −₹125. Minus GST on commission (no ITC): −₹22.50. Minus food cost (say 35%): −₹175. Minus other costs: −₹100. Net profit: ₹77.50 on ₹500 order (15.5% margin). KEY ISSUE: Restaurants complain that 18% GST on 25% commission (with no ITC) + 5% GST regime = 'double taxation'. Swiggy/Zomato: 'We provide demand generation service — our commission is legitimate business expense'. Government: 'Restaurant chose 5% scheme — can't claim ITC. That's the trade-off for lower consumer rate.'
What is the difference between restaurant service (5%) and outdoor catering (18%) — with examples?
CLASSIFICATION — THE ₹13% DIFFERENCE: RESTAURANT SERVICE (5% no ITC): Definition: 'Supply of food/drinks by a restaurant, eating joint, mess, canteen — whether for consumption on or away from the premises'. Key: customer comes TO the establishment (or orders delivery FROM it). Examples at 5%: Dine-in at any restaurant. Takeaway/parcel. Food delivery via app. Food court (mall). Railway pantry car. Airport food court. Hospital canteen (if run by restaurant). College mess (if outsourced to caterer operating ON premises). OUTDOOR CATERING (18% with ITC): Definition: 'Supply of food/drink at a place other than the supplier's premises, together with service of cooking and serving'. Key: caterer goes TO customer's chosen location AND serves there. Examples at 18%: Wedding catering at marriage hall. Corporate event food at hotel banquet (caterer hired separately). Birthday party catering at farmhouse. Institutional catering (Sodexo managing company canteen). Office pantry service by external vendor. Festival/fair food stall? Depends — if caterer's own temporary stall: 5%. If hired by event organizer to serve: 18%. GREY AREAS & DISPUTES: (1) Caterer operating canteen inside hospital 24/7: Is this 'outdoor catering' (18%) or 'restaurant operating on premises' (5%)? If caterer has exclusive space + own staff + own menu = 5% (effectively a restaurant). If client controls menu, timing, serving = 18% (outdoor catering). (2) Party hall with in-house kitchen: Guest books party hall + orders food from hall's kitchen. Hall's own kitchen serves = 5% (restaurant service). External caterer hired by hall = 18% (outdoor catering). (3) Tiffin service (dabba): Daily tiffin delivery to offices/homes: 5% (it's like restaurant takeaway/delivery). Not outdoor catering because there's no 'serving at premises'. (4) Live cooking counter at event: Chef comes to wedding, sets up live counter, cooks and serves = 18% (outdoor catering). STRATEGIC PLANNING: Many caterers structure business to qualify for 5%: Open small kitchen/restaurant (physical premises). Take orders from there. Deliver to events as 'takeaway'. Don't provide servers — only food delivery. Risk: if audited and found to be outdoor catering in substance = 18% demand + penalty.
How are food aggregator commissions treated under GST — and why do restaurants complain?
PLATFORM COMMISSION — GST TREATMENT: WHAT PLATFORMS CHARGE: Zomato: 20-28% commission on order value. Swiggy: 18-25% commission. EatSure: 15-20%. Amazon Food (now closed): was 10-15%. Plus: GST registration fee, photography fee, ad spend (promoted listings), delivery partner fee (if restaurant doesn't have own delivery). GST ON COMMISSION: Commission is 'intermediary service' = 18% GST. Example: ₹1,000 order. Commission 25% = ₹250. GST on commission: 18% of ₹250 = ₹45. Restaurant pays: ₹250 + ₹45 = ₹295 to platform. ITC ON COMMISSION GST: Restaurant is under 5% no-ITC scheme. Therefore: ₹45 GST paid on commission → NO ITC AVAILABLE. This ₹45 is DEAD COST. TOTAL TAX BURDEN ON RESTAURANT (per ₹1,000 order): GST collected from customer (paid by Swiggy): ₹50 (5%). Swiggy keeps commission: ₹250 + ₹45 GST = ₹295. Restaurant receives: ₹1,000 − ₹295 = ₹705. GST on rent (18% of say ₹50 per order allocated): ₹9 — no ITC. GST on packaging (18%): say ₹5 — no ITC. GST on other inputs: say ₹10 — no ITC. Restaurant's effective tax burden: ₹45 + ₹9 + ₹5 + ₹10 = ₹69 per ₹1,000 order (6.9% — higher than the 5% it charges!). INDUSTRY DEMANDS: (1) Allow ITC for restaurants (shift back to 12% or 18% with ITC). (2) Cap platform commission at 15%. (3) Exempt commission GST for restaurants under 5% scheme. (4) Classify food delivery as 'essential service' with lower commission cap. GOVERNMENT RESPONSE: CCI (Competition Commission) investigation ongoing into Zomato/Swiggy. NRAI (National Restaurant Association) filed complaints. ONDC (Open Network for Digital Commerce): government's answer — lower commission platform (5-8%). But adoption slow — Zomato/Swiggy control 95%+ market. NRAI LOGOUT CAMPAIGN (2020-22): 2,500+ restaurants temporarily left aggregator platforms. Result: most returned — platforms control customer traffic. GST structure remains unchanged as of 2024.

Restaurant & Food Delivery GST — Platform Billing, Catering Classification

Laabam.One handles restaurant GST: 5% no-ITC restaurant billing, Zomato/Swiggy platform collection reporting, hotel dual-rate management, cloud kitchen classification, outdoor catering 18% invoicing, alcohol bill splitting, and food aggregator commission reconciliation.

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