GST ON RESTAURANT BILL: LATEST RATES AND RULES EXPLAINED

If there’s one thing Indians never stop discussing, it’s food, where to eat, what to order, and how much it costs. And a big part of that cost is the GST on restaurant bill, something most people notice only when the final total looks a little higher than expected. With the GST Council’s 56th meeting announcing new changes effective 22nd September 2025 (visit: Press Release: Press Information Bureau), it’s a good time to understand how the restaurant GST rate and GST rate in restaurant structures now work.

Whether you run a cafe, order food delivery often, or simply enjoy an occasional dineout, this guide simplifies all the new updates. You’ll also see how tools like TMWala can help restaurant owners stay compliant, avoid GST mistakes, and manage filings effortlessly.

WHY GST MATTERS FOR RESTAURANTS AND FOOD LOVERS

Before GST, restaurant bills were filled with multiple taxes, VAT, Service Tax, and sometimes confusing service charges. Today, thanks to a single tax system, billing has become easier. But GST still varies depending on the type of restaurant, where it’s located, and what you order.

The updated norms aim to reduce the tax burden on regular meals while tightening rules on luxury and indulgent food items. Let’s break everything down in simple terms.

UNDERSTANDING PRE-GST ON RESTAURANT BILL

Earlier, your restaurant bill included:

• VAT (Value Added Tax)

Applied to the food portion of the bill.

• Service Tax

Applied to the service portion, like dining, ambience, and hospitality.

• Service Charge

A fee charged by restaurants on their own.

This is not a tax. It goes directly to the restaurant, not the government.

These multiple layers often confuse customers. GST removed this complexity and replaced everything with a single rate.

GST RULES FOR RESTAURANTS – UPDATED FOR 2025

Under the new GST system, restaurants fall into one of two categories:

• 5% GST without input tax credit (ITC)
• 18% GST with input tax credit (ITC)

The rate depends mainly on whether the restaurant is inside a hotel and the tariff of that hotel.

Here’s a simple breakdown.

GST SLAB FOR RESTAURANTS

TYPE OF RESTAURANT / SERVICE	GST RATE
Indian Railways / IRCTC food services	5% without ITC
Standalone restaurants, including takeaways	5% without ITC
Standalone outdoor catering	5% without ITC
Catering inside hotels with a tariff below ₹7,500	5% without ITC
Catering inside hotels with a tariff ₹7,500 or more	5% without ITC
Restaurants in hotels with a room tariff of ₹7,500 or more	18% with ITC
Catering inside hotels with a tariff of ₹7,500 or more	18% with ITC
Food delivery services	18% with ITC

This covers restaurants as well as individuals supplying food or catering in hotels with high room tariffs.

Restaurant owners using digital tools like TMWala can automate GST classification based on order types, avoiding billing errors and penalties.

GST RATE ON FOOD ITEMS

A big change announced in the 56th Council Meeting is the reduction of GST on many everyday food products. Essentials were already exempt, but now processed and packaged foods have also been made more affordable.

Here’s a clean summary:

FOOD ITEMS WITH LOWERED GST

• UHT milk, paneer packs, khakhra, chapathi, roti -5% reduced to Nil
• Paratha, parotta -18% to Nil
• Butter, condensed milk, cheese, dairy fats -12% to 5%
• Dried fruits & nuts (almonds, pistachio, dates, figs) -12% to 5%
• Pasta, refined sugar, confectionery, extruded snacks -12% to 5%
• Jams, jellies, preserved vegetables -12% to 5%
• Coffee/tea extracts, malt extracts -18% to 5%
• Cocoa, chocolates -18% to 5%

FOOD ITEMS WITH HIGHER GST

• Pan masala -28% to 40%
• Sugary or carbonated beverages -18% or 28% to 40%
• Other non-alcoholic drinks -18% to 40%

The government is clearly encouraging healthier eating while discouraging indulgent or harmful consumption.

GST RATE FOR FOOD DELIVERY

Food delivery services like Swiggy, Zomato, and restaurant-owned apps continue to attract 18% GST with ITC. However, this GST is charged to the restaurant or seller, not directly on the food price for consumers.

Delivery apps only collect the tax, but restaurants must deposit it on time, maintain records, and file returns accurately.

Here again, TMWala helps by syncing order data and generating GST-ready reports automatically.

INPUT TAX CREDIT: WHO GETS IT AND WHO DOESN’T?

One of the biggest concerns for business owners is the GST input credit for restaurants.

Here’s the simple rule:

• Restaurants charging 5% GST – No ITC allowed
• Restaurants charging 18% GST – ITC allowed, including credit on:
  • Raw materials
  • Kitchen equipment
  • Restaurant furniture
  • Packaging material
  • Utilities (electricity, gas, etc.)

This difference is crucial because choosing the right category impacts profits.

GST ON CATERING SERVICES

Catering is treated differently from regular restaurants:

• Standalone outdoor catering – 5% GST without ITC
• Catering inside premium hotels (tariff ₹7,500 or more) – 18% GST with ITC

Catering businesses often deal with multiple invoices for ingredients, staff services, rentals, etc.
Using a tool like TMWala ensures every bill is correctly categorized and stored for compliance.

To know more about GST on Catering Service, visit this blog article.

HOW THESE GST CHANGES AFFECT RESTAURANT OWNERS

• Lower Taxes Lead to Higher Customer Footfall: A 5% rate means customers pay less tax than before, which encourages more dine-outs.
• Simpler Billing: One single GST rate replaces VAT + Service Tax.
• Better Pricing Strategies: Restaurants that operate inside high-end hotels might charge 18%, but they benefit from ITC savings.
• Reduced Risk of Errors: GST rules can be tricky; wrong classification leads to penalties or notices.

Modern platforms like TMWala help restaurants maintain error-free bills, file accurate GST returns, and track liabilities in real time.

CONCLUSION

The updated GST structure is a welcome change for both consumers and business owners. Reduced GST rates on essential food items make everyday purchases cheaper, while streamlined billing offers more transparency on your tax on restaurant bills.

For restaurant owners, understanding the GST rate on restaurant food, GST rules for restaurants, and varying slabs for services like food delivery and catering is essential for smooth operations. With the right tools like TMWala, compliance becomes easy, automated, and stress-free.

In short, the new GST regime brings clarity, simplicity, and savings, making dining out and managing a restaurant business much more enjoyable.

FAQS ON GST FOR RESTAURANTS (2025 UPDATE)

1. What is the GST on a restaurant bill in 2025?
   GST on restaurant bill is either 5% without ITC or 18% with ITC, depending on the type and location of the restaurant.
2. What is the restaurant GST rate for normal standalone restaurants?
   Standalone restaurants and takeaways charge 5% GST without ITC.
3. What is the GST rate in a restaurant located inside a hotel?
   a) If the hotel room tariff is below ₹7,500 → 5% without ITC
   b) If the room tariff is ₹7,500 or more → 18% with ITC
4. Is input tax credit available to restaurants?
   a) Only restaurants charging 18% GST can claim ITC.
   b) Restaurants charging 5% GST cannot claim ITC.
5. What is the GST slab for restaurants as per the 2025 rules?
   Restaurants fall under either 5% without ITC or 18% with ITC, depending on hotel tariff and service type.
6. What is the GST rate for food delivery?
   Food delivery services attract 18% GST with ITC, but this GST is paid by restaurants, not customers.
7. Are food items cheaper under the new GST updates?
   Yes, many essentials like paneer, UHT milk, chapathi, roti, and dried fruits now have reduced GST, some reduced to Nil.
8. What is the GST on catering services?
   a) Standalone outdoor catering → 5% without ITC
   b)Catering inside hotels with tariff ≥ ₹7,500 → 18% with ITC
9. Why did GST increase on pan masala and sugary drinks?
   To discourage unhealthy consumption rates increased up to 40%.
10. How can TMWala help restaurant owners with GST?
    TMWala automates GST classification, syncs order data, generates GST reports, and reduces filing errors, perfect for restaurants and caterers.