Understanding Tax on Food in Restaurants: What Every Diner in India Should Know in 2025

The tax on food in a restaurant in India is Goods and Services Tax (GST), charged at 5% for most restaurants, including dine-in, takeaway, air-conditioned, non-AC, cloud kitchens, and quick-service outlets. A higher rate of 18% applies only to restaurants inside hotels where the room tariff is 7,500 rupees or more per night, and to outdoor catering. So if you eat at a normal standalone restaurant, you pay 5% GST on your food bill. Restaurants charging 5% cannot claim input tax credit, while those charging 18% can. Alcohol is not covered by GST and is taxed separately by each state. Understanding this helps both diners read their bills and restaurant owners stay compliant. This guide explains how much tax you pay on food in a restaurant, the different rates, who charges what, and what restaurant business and franchise owners need to know to run a compliant outlet.

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How Much Tax Do You Pay on Food in a Restaurant?

The tax you pay on food in a restaurant is mostly 5% GST. For the vast majority of restaurants in India, this single rate covers your entire food bill.

This 5% is split as 2.5% CGST and 2.5% SGST, and it applies whether you dine in, take away, or order a home delivery. So on a food bill of 1,000 rupees, you pay 50 rupees as GST, making the total 1,050 rupees. The rate is the same for AC and non-AC restaurants, cafes, sweet shops, bakeries, and cloud kitchens. For everyday dining, 5% is the tax you can expect on your restaurant food.

What Are the Different GST Rates on Restaurant Food?

The GST on restaurant food in India comes in two main rates, 5% and 18%, depending on the type of restaurant. Knowing which applies helps you understand your bill and stay compliant.

The Two Main Rates

Here is how the rates work:

• 5% GST (no input tax credit): standalone restaurants, AC and non-AC, cafes, takeaways, cloud kitchens, and quick-service outlets
• 18% GST (with input tax credit): restaurants inside hotels where the room tariff is 7,500 rupees or more per night, and outdoor catering services

The rate for a hotel restaurant depends on the declared room tariff, not the food price. If even one room in the hotel is priced at 7,500 rupees or more, the attached restaurant charges 18% on the full bill. For most diners, though, the 5% rate is what appears on the bill. The type of establishment decides the rate you pay.

Why Do Some Restaurants Charge 18% Instead of 5%?

Some restaurants charge 18% because they fall into the luxury or catering category, where the higher rate applies along with the benefit of input tax credit. This is the exception, not the rule.

A restaurant inside a hotel with a room tariff of 7,500 rupees or more per night must charge 18% GST, but in return it can claim input tax credit on its purchases like raw materials, rent, and equipment. Outdoor catering for weddings, corporate events, or parties also attracts 18% with credit. These businesses have higher costs, so the credit helps offset them. A normal standalone restaurant cannot choose to charge 18% just to claim credit. The 18% rate applies only to specific luxury and catering situations.

What Is Input Tax Credit and Why Does It Matter?

Input tax credit, or ITC, lets a business offset the GST it pays on purchases against the GST it collects from customers. For restaurants, ITC availability depends entirely on the rate they charge.

Restaurants charging 5% cannot claim ITC, meaning the GST they pay on vegetables, spices, oil, rent, and equipment is a cost they simply absorb. Restaurants charging 18%, such as luxury hotel outlets and caterers, can claim that credit and reduce their tax burden. For most standalone restaurants, the flat 5% without ITC still works out cheaper and simpler, since tracking every invoice for credit adds administrative work. Understanding ITC helps a restaurant owner pick the right approach for their business.

How Is GST Charged on Food Delivery Orders?

GST on food delivery orders is charged at 5%, but since 2022 the delivery platforms collect and pay it, not the restaurant. This changed how online food tax works in India.

When you order through Zomato or Swiggy, the 5% GST on the food is collected and paid by the platform under the GST rules, while an 18% GST applies to the delivery fee itself. Restaurants must still report these sales in their GST returns, even though the platform handles the tax on the food. This system keeps online food tax simple for customers, who just see the 5% on their food. For delivery orders, the platform now carries the tax responsibility.

How Did GST Change Restaurant Food Tax?

GST simplified restaurant food tax by replacing many older taxes with one system. For diners and owners alike, this made bills clearer and compliance easier.

Before GST

Before GST arrived in 2017, restaurant bills carried several taxes, VAT, service tax, and sometimes a service charge, which made bills confusing and often higher. Customers struggled to understand what they were actually paying.

After GST

GST replaced those layers with a single, clear rate, mostly 5% for restaurants. This made bills simpler to read and lowered the overall tax on most restaurant meals. For owners, one unified tax also made filing and compliance more straightforward than the old multi-tax system. This shift to one clear rate is what made restaurant tax far easier to understand.

What Should Restaurant and Franchise Owners Know About Tax?

Restaurant and franchise owners need to charge the correct GST rate, file returns on time, and use the right codes to stay compliant. Getting tax wrong leads to notices and penalties.

Key Compliance Points

Owners should keep these in mind:

• Charge 5% GST unless you genuinely qualify for the 18% category
• Never charge 18% just to claim ITC if you are a standalone restaurant, as this is a violation
• Use the correct SAC code 9963 on all invoices and returns
• File your GST returns accurately and on time
• Report delivery-platform sales even though the platform pays that GST
• Alcohol is taxed separately under state rules, not GST

A good franchise brand helps new owners handle this correctly from day one. Staying compliant protects your outlet from penalties and keeps your business running smoothly.

How Does a Franchise Make Tax Compliance Easier?

A good franchise makes tax compliance easier by giving owners proven systems, training, and support, so they get the billing and filing right from the start. This removes much of the confusion for first-time owners.

When you join a strong brand like Tandooriwala, you receive SOP training, operational guidance, and 24×7 support that helps you set up correct billing, apply the right GST rate, and run your outlet smoothly. Founded in 2013 by Michelin-star Master Chef Shajahan M Abdul, Tandooriwala now supports over 86 outlets with complete systems that cover the operational side of running a compliant restaurant. There are many benefits of buying a restaurant franchise like this. This kind of support means a new owner is never left guessing on the basics. A strong franchise turns tricky compliance into a guided, manageable process, so you can focus on serving customers instead of worrying about paperwork.