GST Billing for Restaurants in India: The Complete 2026 Compliance Guide

The GST Rate Most Restaurant Owners Get Wrong

Since January 2018, the GST Council simplified restaurant taxation significantly — but confusion about the old rules persists. Here is the actual position as of 2026:

Standalone restaurants (AC or non-AC, any size): 5% GST, no Input Tax Credit (ITC). This covers the overwhelming majority of Indian restaurants — from a dhaba in Jaipur to a full-service AC restaurant in Bengaluru's Indiranagar. The distinction between AC and non-AC for GST purposes was abolished in November 2017, effective from January 1, 2018.

Restaurants in 5-star hotels: 18% GST, with ITC available. This applies only to restaurants that are part of hotels with a declared room tariff above ₹7,500 per night.

Outdoor catering (food supplied outside the restaurant premises): 18% GST with ITC, or 5% without ITC if the caterer opts out.

Composite scheme: Available to restaurants with aggregate turnover below ₹1.5 crore annually. Pay a flat 5% on turnover with no ITC, file quarterly instead of monthly. No interstate sales allowed. This is often simpler for small single-outlet restaurants.

Most standalone Indian restaurants are in the first category: 5% GST, split as 2.5% CGST + 2.5% SGST. No ITC means you cannot offset the GST you pay on your raw materials and inputs against your GST liability — which is why restaurant input costs are not broken down by GST component in most accounting systems.

GSTIN: When Registration Is Mandatory

GST registration is mandatory when your aggregate annual turnover exceeds:

• ₹20 lakh for most states
• ₹10 lakh for special category states (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, Uttarakhand, Himachal Pradesh, Jammu & Kashmir)

These thresholds apply to total revenue from all business activities — not just restaurant sales. If you also have a catering arm or supply food to corporates, all revenue counts toward the threshold.

Once you cross the threshold in any financial year, you must register within 30 days. Registration is done through the GST portal (gst.gov.in). A GSTIN is a 15-character alphanumeric identifier: first two digits are your state code, next ten are your PAN, the fourteenth character indicates the entity type, and the fifteenth is a check digit.

Some restaurants register voluntarily even below the threshold — particularly those supplying to corporate clients or hotels that require a GST invoice for their own ITC claims. Voluntary registration is permitted.

Penalty for non-registration when required: 100% of the tax due or ₹10,000, whichever is higher, per the GST Act provisions.

What Every GST Invoice Must Include

This is where most billing errors occur. A GST-compliant restaurant invoice must contain all of the following:

1. Supplier details Your legal business name as registered under GST, full address, and your 15-digit GSTIN. This must match your GST registration exactly — abbreviations or trading names that differ from the registered name create filing complications.

2. Invoice number and date Invoice numbers must be sequential, unique per financial year, and contain no more than 16 characters. Most restaurants use formats like INV-2526-0001 (financial year 25-26, sequence number 0001). The sequence resets at the start of each financial year (April 1).

This is a common compliance failure: restaurants that skip invoice numbers, reuse numbers, or use non-sequential numbering face scrutiny during GST audits. Software like Restrofi auto-increments invoice numbers and maintains the sequence without any manual management.

3. Customer details For B2C transactions (individual guests paying personally), only the name and address are required for invoices below ₹10,000. For invoices above ₹10,000, or for B2B transactions where the recipient wants ITC, you need the customer's GSTIN as well.

4. Place of supply For restaurant services, the place of supply is the state where the restaurant is located — so a restaurant in Maharashtra charges CGST + SGST (Maharashtra), not IGST. This distinction matters: IGST applies to interstate transactions; restaurant dining is always intrastate.

5. HSN/SAC code For restaurant services, the relevant SAC (Service Accounting Code) is 9963 — covering accommodation, food, and beverage services. For individual food items on an itemised invoice, HSN codes apply to each item above ₹50,000 in a B2B invoice; for restaurant B2C bills this is rarely relevant in practice.

6. Taxable value, GST rate, and GST amount The invoice must show the pre-GST value, the GST rate (5%), the CGST component (2.5% of taxable value), and the SGST component (2.5% of taxable value) separately. The grand total is taxable value + CGST amount + SGST amount.

7. Signature or digital authentication Physically signed invoices or digitally authenticated invoices are both valid.

Common Filing Mistakes and Their Penalties

GST compliance has two main filing requirements for most restaurants: GSTR-1 (outward supply details, filed monthly or quarterly) and GSTR-3B (summary return with tax payment, filed monthly).

Mismatch between GSTR-1 and GSTR-3B: If your declared outward supplies in GSTR-1 don't reconcile with the summary in GSTR-3B, the system flags a discrepancy. This is often caused by manual data entry errors. Automated billing systems that export data directly to your accountant's GST filing software eliminate this.

Missing or late filing: The late fee is ₹50/day (CGST + SGST) for returns with tax liability, and ₹20/day for nil returns, capped at ₹10,000 per return. Restaurants that miss multiple months of GSTR-3B can accumulate significant late fees.

Incorrect tax rate: Charging 18% when you should be charging 5% (or vice versa) creates a GST liability mismatch. The restaurant must issue a credit note to the affected customers (practical only for B2B customers) or absorb the difference.

Non-issuance of invoice: Under Section 125 of the CGST Act, failing to issue an invoice where required can attract a penalty of up to ₹25,000. For restaurants with daily cash transactions, this is a real risk if billing is manual and inconsistent.

ITC claimed incorrectly: Since restaurants at 5% GST cannot claim ITC, any inadvertent ITC claim in GSTR-3B creates a compliance issue. This is a common error when restaurant accounting is handled by a general-purpose CA who doesn't specialise in F&B.

Service Charge: The Separate Issue You Need to Know

Service charge is not GST. This distinction confuses many restaurant owners and, consequently, their guests.

Service charge is a discretionary charge collected by the restaurant — typically 10% of the food and beverage bill — that is not mandated by law and is separate from GST. Per CCPA (Central Consumer Protection Authority) guidelines issued in 2022, service charge:

• Cannot be added by default; it must be voluntary.
• Cannot be collected under a different name.
• Must be clearly disclosed on the menu.
• Cannot be added to the bill before the GST calculation (to inflate the GST base).

In practice, many restaurants still add service charge as a line item, and many guests don't object. But the legal position is that guests can refuse to pay it, and the restaurant cannot refuse service based on non-payment of service charge. Calculate GST on the food and beverage value, not on the total including service charge.

How Automated Billing Handles All of This

The compliance requirements above — sequential invoice numbering, CGST/SGST split, correct HSN/SAC codes, correct place of supply — are not complicated once they're set up correctly. They are tedious to manage manually across dozens of transactions per day.

Restrofi's GST invoicing system handles every requirement automatically:

• Invoice numbers auto-increment and reset on April 1 each financial year.
• CGST/SGST split is calculated on every line item based on the GST rate you've set for that item.
• GSTIN pulls from your restaurant settings and appears on every invoice.
• SAC code 9963 is applied to the service component automatically.
• PDF invoices are generated per order and available to email or WhatsApp to guests instantly.
• Monthly data exports are formatted for GSTR-1 filing, reducing your accountant's effort significantly.

For a restaurant doing 60–80 covers per day, manual GST billing via a general billing software takes 15–20 minutes of staff time per day to reconcile. Automated billing brings that to near zero. At ₹300 per hour of staff cost, that's a ₹4,500–6,000 monthly saving in labour alone.

For context on the full set of metrics worth tracking in a compliant, data-driven restaurant, see Restaurant Analytics Metrics to Track.

How to Register Your Restaurant for GST

If you've crossed the ₹20 lakh threshold or are registering voluntarily, here is the step-by-step process through the GST portal.

GST Composite Scheme vs Regular: Which Is Better for Your Restaurant?

The Composition Scheme is available to restaurants with aggregate annual turnover below ₹1.5 crore. Under this scheme:

• Flat 5% tax on turnover (same rate, but computed on gross sales — not on the taxable value after deductions)
• Quarterly filing instead of monthly GSTR-1 + GSTR-3B
• No ITC (same restriction as regular 5% restaurants)
• No interstate sales — you cannot supply food across state lines or register for e-commerce delivery platforms like Swiggy/Zomato if you're under composition scheme
• Simpler compliance — only CMP-08 quarterly payment and annual GSTR-4 filing

The composition scheme is generally better for:

• Single-outlet restaurants with turnover between ₹20 lakh and ₹1 crore
• Restaurants not doing delivery via aggregators (since Swiggy/Zomato require regular GST registration)
• Owners who want to minimise CA fees and filing complexity

The regular scheme is better for:

• Restaurants on Swiggy, Zomato, or other platforms (mandatory regular GST registration)
• Restaurants that may cross ₹1.5 crore turnover in the next 12 months
• Multi-outlet operators who need centralised reporting

You can switch from composition to regular scheme voluntarily, or you're moved automatically when turnover exceeds ₹1.5 crore.

2026 GST Updates Relevant to Restaurants

The 55th GST Council meeting (December 2024) did not change restaurant tax rates. The 5% slab for standalone restaurants remains unchanged. However, a few adjacent updates are relevant:

Online food delivery platforms: GST council discussions around TCS (Tax Collected at Source) obligations for platforms like Swiggy and Zomato continue. Currently, platforms are required to collect GST on behalf of restaurants that are not registered (replacing the old ECO mechanism). Registered restaurants receive the full order value from the platform and handle their own GST filing.

Ready-to-eat packaged food: If your restaurant sells branded packaged food (chips, chutneys, spice blends) alongside dine-in service, these products fall under different HSN codes and may attract 12% or 18% GST rather than the restaurant 5% — ensure your billing system treats these as separate line items with the correct rate.

E-invoicing (IRP): Restaurants with annual turnover above ₹5 crore are required to generate e-invoices through the Invoice Registration Portal (IRP) for B2B transactions. This threshold has been lowering progressively. If you're approaching ₹5 crore turnover, verify your billing software supports IRP integration.

Practical Checklist for GST Compliance

If you're currently managing GST manually or using basic billing software, this is the minimum to get right:

Registration: ✔ GSTIN obtained if turnover exceeds ₹20 lakh annually ✔ GST registration certificate displayed at premises (mandatory under Rule 18)

Invoicing: ✔ Sequential invoice numbers, unique per FY ✔ GSTIN on every invoice ✔ SAC 9963 applied to service component ✔ CGST 2.5% + SGST 2.5% shown separately ✔ Service charge not included in GST base

Filing: ✔ GSTR-1 filed monthly (or quarterly if turnover below ₹1.5 crore) ✔ GSTR-3B filed and tax paid monthly ✔ No ITC claimed (for 5% restaurants)

Records: ✔ Invoice copies retained for 6 years (GST audit window) ✔ Monthly reconciliation between billing software and GST portal

If you're ready to automate this: start with Restrofi and your GST invoicing is compliant from the first order.

---

Related: What is RestroAI? — daily revenue insights on WhatsApp for Indian restaurants.