GST rules for restaurants work differently from most other businesses, with rates depending on whether the restaurant is air-conditioned, part of a hotel, or operating under the Composition Scheme. This guide breaks down how restaurant GST actually works so you can calculate bills correctly.
GST Rates for Restaurants
Most standalone restaurants, whether air-conditioned or not, charge 5% GST without the benefit of Input Tax Credit (ITC). Restaurants located inside hotels with room tariffs above a certain threshold may instead charge 18% GST, and can claim ITC. Always check which rate applies to your specific establishment before billing.
Use our GST Calculator for Restaurants to quickly add or remove GST at either 5% or 18% and see the exact tax breakdown on any bill amount.
Composition Scheme for Small Restaurants
Small restaurant businesses under a certain annual turnover threshold can opt into the GST Composition Scheme, which allows them to pay a flat, lower tax rate on turnover instead of charging GST per invoice. Businesses under this scheme cannot charge GST separately to customers or claim ITC, and typically cannot issue a tax invoice in the standard format.
Service Charge vs GST: What Is the Difference?
Many restaurants add a “service charge” line to the bill, which is entirely separate from GST. Service charge is a discretionary fee the restaurant sets itself (often 5-10%) and is not a government tax, while GST is a mandatory tax set by law. Customers are not legally required to pay service charge, though restaurants often include it by default.
Takeaway and Delivery Orders
GST applies the same way to takeaway and delivery orders as it does to dine-in orders, generally at 5% for standard restaurants. Delivery platform fees, if itemized separately, may be taxed differently, so it is worth reviewing itemized bills carefully.
How to Calculate GST on a Restaurant Bill
To add GST: multiply the pre-tax bill amount by the applicable rate (5% or 18%) and add it to the subtotal. To remove GST from a total that already includes tax: divide the total by (1 + tax rate) to get the pre-tax amount, then subtract that from the total to find the GST portion. Our GST Calculator for Restaurants does both calculations instantly.
Frequently Asked Questions
What GST rate applies to restaurants?
Most standalone restaurants charge 5% GST without ITC. Restaurants in hotels with higher room tariffs may charge 18% GST with ITC available.
Is service charge the same as GST?
No. Service charge is a discretionary fee set by the restaurant, while GST is a mandatory government tax. They are calculated and applied separately.
Does GST apply to takeaway and delivery orders?
Yes, takeaway and delivery orders are generally taxed at the same GST rate as dine-in orders.
What is the Composition Scheme for restaurants?
It lets small restaurants below a turnover threshold pay a flat, lower tax rate on total turnover instead of itemized GST, but they cannot charge GST separately or claim Input Tax Credit.
How do I calculate the GST amount from a total restaurant bill?
Divide the total by (1 + tax rate) to find the pre-tax amount, then subtract that from the total. Our GST Calculator for Restaurants automates this.