GST on Restaurants and Food Delivery: Rates and Composition Scheme

Running a restaurant, cafe, or cloud kitchen means dealing with GST on two fronts: what you charge the customer, and what you can claim back on what you buy to run the kitchen. Restaurant services also work differently from most businesses, with a composition scheme built specifically for them and a food delivery mechanism that shifts part of the compliance work onto Swiggy or Zomato. This guide covers the current rate position for FY 2026-27, how composition works for a restaurant, and what changes once you list on a delivery platform.

How GST Applies to Restaurant Services

GST's rate structure changed meaningfully with the GST 2.0 rate rationalisation that took effect in September 2025, and restaurant services were part of that reset. This site's own current GST rate data places small and standalone restaurants in the 5% slab, without input tax credit in most cases. In practice, the 5% you charge a customer is a pass-through: you can't separately claim back the GST already paid on ingredients, packaging, rent, or other business inputs against that output tax.

A restaurant inside a hotel is a different question. GST has long linked a hotel restaurant's rate to the hotel's room tariff, so a restaurant inside a hotel property can be taxed differently from a standalone one depending on what the hotel charges for its rooms. This codebase's own rate data doesn't confirm a specific figure for that hotel-linked category after GST 2.0, so rather than state an unverified number, here's the honest guidance: if you run a restaurant inside a hotel, check the applicable rate for your specific premises against the site's own GST rate slab reference or the official GST portal before you finalise your billing, since it may not match the standalone rate above.

One more point applies regardless of which category you fall into: GST rates are notified by precise classification, and the GST Council revises individual rates periodically. The 5% figure above is the current position as this site's own rate data has it, not a fixture to rely on indefinitely. Treat any specific rate, here or anywhere else, as something to confirm at the time you actually invoice.

The Composition Scheme for Restaurants

Instead of charging GST at the applicable rate on every sale, an eligible restaurant can opt into the composition scheme and pay a flat percentage of turnover instead, with none of the invoice-level ITC tracking regular registration involves. For restaurants specifically, that flat rate is 5% of turnover, the same rate this site's regular scheme versus composition scheme guide lists for restaurants that don't serve alcohol. The turnover ceiling is the same one used for goods businesses under composition, currently up to ₹1.5 crore (₹75 lakh in special category states), not the lower ₹50 lakh ceiling for other service providers.

The trade-offs are the same ones that apply to composition generally. You give up input tax credit entirely, so GST already paid on purchases, rent, and other expenses becomes a cost baked into your menu pricing rather than something you claim back. You also can't show GST as a separate line on the bill: a composition restaurant issues a bill of supply, not a tax invoice, so the tax is absorbed into the price rather than itemised out. Alcohol for human consumption sits outside GST altogether, and composition dealers can't deal in goods that fall outside GST, so a restaurant serving alcohol can't run that part of its business under composition.

Composition vs Regular for a Restaurant, Side by Side

These figures describe the common case of a standalone restaurant, not one inside a hotel, and the rate and ITC position end up close either way: since the standard restaurant rate is already 5% without ITC in most cases, the usual case for regular registration, giving up a flat rate in exchange for credit back, doesn't apply the way it does for a trader or manufacturer. The real decision drivers are the turnover ceiling, invoicing, and filing differences below, plus confirming your rate separately if you operate inside a hotel.

Food Delivery Platforms: Who Actually Collects the GST

Listing on Swiggy, Zomato, or a similar aggregator changes who is responsible for the GST on a given order. For specified categories of restaurant service supplied through such platforms, the platform itself is treated as the deemed supplier rather than a simple middleman passing your invoice through. It collects and pays GST on those orders directly to the government, rather than merely collecting a small tax-collected-at-source percentage against your own liability the way a typical marketplace does for a seller of goods. Part of the compliance burden for that order shifts from you to the platform.

This is a different mechanism from the general e-commerce rules that apply to composition dealers, and the two shouldn't be assumed to work identically. If you run a composition-scheme restaurant and also list on a delivery platform, confirm the specific treatment with the platform's compliance documentation or a tax advisor rather than assuming either scheme's rules translate directly. Keep your own turnover records regardless: you still need accurate figures for your own registration status, scheme eligibility, and annual return, whether or not GST on a particular order was collected by the platform.

Registration and Invoicing for a Small Restaurant or Cloud Kitchen

GST registration for a restaurant or cloud kitchen becomes mandatory once your aggregate turnover crosses the applicable threshold. The GST registration threshold guide covers the current figures, along with situations, inter-state supply among them, that trigger mandatory registration regardless of turnover. Below the threshold, registering voluntarily is still worth considering if you plan to supply inter-state, expect to cross the threshold soon, or want a GSTIN for other practical reasons.

Once you're registered, the composition-versus-regular decision comes down to a few practical questions rather than the headline tax rate, which, as covered above, tends to land close either way for a plain restaurant.

1. Turnover: nearing or likely to exceed ₹1.5 crore means composition stops being an option, so plan your invoicing and filing for the regular scheme before you cross the line.
2. Supply chain and revenue mix: a full-service restaurant with catering, banquet, or packaged food revenue under different rate and ITC treatment is more likely to need the regular scheme's proper tax invoicing, since mixed rates are hard to manage under one flat rate.
3. Simplicity versus documentation: a small cloud kitchen with one simple output and a straightforward supplier base often finds composition's quarterly payment and single annual return genuinely simpler, given the default restaurant rate already excludes ITC in most cases.
4. Alcohol and hotel premises: serving alcohol rules out composition for that part of the business, and operating inside a hotel means resolving your specific rate before comparing schemes at all.
5. Reverse charge: this still applies at normal rates even under composition, for notified services or purchases from unregistered suppliers, so it isn't a cost composition lets you avoid.