GST on Restaurant Food in India: Rates, Rules, and Impact in 2025

The implementation of GST on restaurant food has revolutionized the way both restaurant owners and customers approach food taxes in India. With a growing dining culture and an ever-expanding food industry, understanding the GST rate for restaurants is crucial. Whether you’re a restaurant owner trying to stay compliant or a diner seeking to understand your bill better, knowledge of GST on restaurant food will help you make informed decisions. 

In this article, we will break down everything you need to know about GST and its impact on the restaurant industry. From the GST rates applicable on food, to how it affects your bill, to the new regulations coming in 2025, this guide provides a thorough understanding of food tax in India.

GST Explained: How It Works in the Food & Restaurant Sector

GST stands for Goods and Services Tax, an indirect tax system introduced in India in 2017. The purpose of GST is to consolidate various taxes like VAT, service tax, and excise duty into a single, unified tax system. GST on restaurant food is one such area where understanding the applicable rates is key to both pricing strategies for restaurants and budgeting for diners.

Differences in GST Treatment for Restaurants vs Packaged Food

While GST on restaurant food applies directly to food consumed in a restaurant setting, packaged food is treated differently under the tax regime. Packaged food products are often taxed at varying rates depending on whether they are fresh, branded, or processed.

• Restaurants: GST on food consumed at restaurants can be 5% or 18%, depending on factors like location and whether the restaurant qualifies for Input Tax Credit (ITC).  If you’re planning to dine out, it’s helpful to check the GST application at Franchise Opportunities in Mumbai, food franchises in Delhi, or Vadodara where dining habits are often varied.
  
  
• Packaged Food: Branded packaged food, processed snacks, or beverages attract higher GST rates compared to fresh, unprocessed food.
  
  

GST Structure: CGST + SGST + IGST Simplified

Under the GST structure, there are three types of tax components:

• CGST (Central GST): Collected by the central government.
  
  
• SGST (State GST): Collected by the state government.
  
  
• IGST (Integrated GST): Applied for inter-state transactions, combining both CGST and SGST.
  
  

This system is designed to simplify the tax collection and payment process, reducing complexities for both restaurant owners and diners.

Breakdown of GST Rates on Food

The GST rate for restaurants depends on the type of establishment and its eligibility for Input Tax Credit (ITC). The breakdown is as follows:

• 5% GST: This rate applies to standalone restaurants that do not qualify for ITC. These are usually small or casual dining establishments that serve food without additional services such as accommodation.
  
  
• 18% GST: This applies to restaurants located in hotels where the room tariff exceeds ₹7,500 per night. These restaurants can avail of ITC, which helps offset taxes on input costs like raw ingredients.
  
  

GST on Packaged and Processed Foods

Different food categories are subject to different GST rates. Here’s a breakdown of how GST applies to packaged and processed foods:

• Fresh food items (0% GST): Raw food like fruits, vegetables, and meat generally don’t attract GST.
  
  
• Branded packaged food (5% GST): Items such as biscuits, snacks, and pre-packaged beverages are taxed at this rate.
  
  
• Processed foods (12% GST): Products like frozen meals, ready-to-eat food, and canned goods fall under this category.
  
  
• Snacks and beverages (18% GST): Items like chocolates, soft drinks, and chips are taxed at the highest rate of 18%.
  
  

Understanding these rates helps both restaurant owners and customers determine the total cost of meals, and also understand the tax burden they carry.

Impact of GST on Your Restaurant Bill

The introduction of GST has made restaurant bills more transparent but also more complex. Here’s how GST on restaurant food affects your bill:

• Pre-GST vs Post-GST: Before GST, dining bills included multiple taxes, such as VAT and service tax, each at different rates depending on the location and restaurant type. Under the current GST on restaurant food, a unified tax rate applies.
  
  For example, if you dine in a restaurant and spend ₹1,000:
  
  
  • Under 5% GST: Your total bill would be ₹1,050.
    
    
  • Under 18% GST: Your total bill would be ₹1,180.
    
    
• ITC Implications for Restaurants: Input Tax Credit (ITC) allows restaurants to offset the taxes paid on inputs (like raw materials and ingredients) against the tax they collect from customers. Restaurants that qualify for ITC (such as those that charge 18% GST) have the advantage of reducing their overall tax burden.
  
  
• Real-World Dining Scenario: If you dine at a restaurant with a 5% GST rate and order a meal worth ₹1,000, the tax will be ₹50. However, if you dine at a hotel with a tariff over ₹7,500 and the restaurant applies 18% GST, your tax will be ₹180, making your overall bill ₹1,180.

New Rules from April 2025: What Has Changed

With changes set to come into effect in April 2025, there are some important updates regarding GST on restaurant food:

• Specified Premises Rule: The updated rule focuses on the room tariff in hotels. Restaurants located in hotels with room tariffs exceeding ₹7,500 will continue to apply 18% GST, while standalone restaurants will continue to apply 5% GST.
  
  
• Impact on Pricing Strategy: For restaurant owners, these changes may require revising menu prices or even adopting new pricing strategies. Higher GST rates on luxury hotel restaurants could result in an increase in overall meal costs, which would need to be balanced with customer expectations.

Food Delivery and GST: What You Should Know

As food delivery services like Zomato and Swiggy continue to grow, understanding the restaurant billing tax for food delivered to your doorstep is essential:

• GST on Delivery via Apps: When you order food through a delivery app, the same GST rate applies as if you were dining at the restaurant. The restaurant applies the tax, and the delivery platform ensures the tax is collected and remitted.
  
  
• Tax Collection by Aggregators: Delivery platforms like Swiggy or Zomato act as intermediaries between restaurants and customers. They facilitate the delivery process but are responsible for ensuring that the applicable GST is charged and remitted to the government.

How GST Impacts Restaurants Financially

For restaurant owners, understanding the financial impact of GST on restaurant food is crucial for effective budgeting:

• Advantages of Opting for 18% GST with ITC: Larger restaurants or those with higher input costs may benefit from 18% GST, as they can claim Input Tax Credit (ITC) on their inputs, thus reducing their overall tax burden.  Consider how this applies to franchise opportunities in Pune.
• Compliance Burden: However, GST also brings challenges. Restaurant owners need to keep track of their transactions, maintain proper records, and file regular GST returns. This can be burdensome, especially for smaller restaurants.
  
  
• Strategy for Pricing and Packaging: With the introduction of GST on restaurant food, restaurants must carefully adjust their pricing strategies to account for the additional tax burden. They may need to increase prices or find ways to reduce operational costs.

Consumer Awareness: What You Should Check On Your Bill

As a consumer, it’s important to check your restaurant bill to ensure the proper application of GST on restaurant food:

• Check GST Rates: Make sure the restaurant is applying the correct GST rate based on the type of establishment. Standalone restaurants should charge 5% GST, while hotels with high tariffs will charge 18%.
  
  
• Service Charge vs GST: Ensure the service charge is listed separately from the GST on restaurant food. Service charges are not taxable under GST, and charging both can be an indication of overcharging.
  
  
• Hidden Fees: Be vigilant about hidden charges. The GST should be clearly stated on the bill, and no additional or illegal fees should be added.

Tandooriwala’s Approach to Honest Billing & Premium Dining

At Tandooriwala, we believe in providing a seamless dining experience with clear and transparent billing practices. Whether you’re enjoying our signature Peri Peri Chicken Tikka or exploring our range of oil-free grilled dishes, you can trust that the GST on restaurant food is always correctly applied.

With Tandooriwala, you can enjoy a world-class Indian barbecue experience while knowing exactly what you’re paying for, down to the last rupee.

Conclusion 

As GST on restaurant food continues to evolve, both restaurant owners and diners must stay informed to avoid confusion and ensure they are following the latest regulations. Understanding GST rates for restaurants helps make dining experiences smoother and more predictable for customers, while allowing restaurant owners to better manage their finances.