Restaurant GST has a reputation for being complicated. The reputation is earned — but the actual rules, once laid out clearly, are manageable. The mistake most operators make is applying one GST rate across the entire bill regardless of what is on it.
GST rules change. Always verify with your CA before filing. This guide reflects the rules as of April 2026 and is intended to help you understand how to configure your POS, not to substitute for professional advice.
The two rate buckets
Most restaurants fall into one of two buckets: 5% GST with no input tax credit (ITC), or 18% GST with ITC. The bucket is determined by whether the restaurant is air-conditioned and licensed, and by the type of supply.
Dine-in: AC vs non-AC
The AC/non-AC distinction that used to determine the rate has been simplified since 2018 — all standalone restaurant services (dine-in, takeaway from a restaurant) are taxed at 5% with no ITC, regardless of whether the premises is air-conditioned. The exception is restaurants located inside hotels where the room tariff exceeds ₹7,500 per night — those charge 18% with ITC.
Takeaway & delivery
Food ordered for takeaway from your restaurant counter is still treated as a restaurant service — 5% GST applies. Food delivered via Swiggy or Zomato is also at 5%, but the platform is the deemed supplier and collects and remits the GST on your behalf. You do not charge GST on the supply invoice to the aggregator.
Alcohol on the bill
Alcohol is outside GST entirely — it is taxed under state excise. On a mixed bill (food + alcohol), apply 5% GST to the food portion only. The alcohol portion attracts the relevant state excise duty, which you should have configured as a separate tax line in your POS. Never apply GST to the alcohol line.
Indostra supports separate tax groups per item category. Map all alcohol items to 'Excise Only' and all food items to 'GST 5%' — the bill calculates correctly and your CA gets a clean export.
Banquet & catering
Banquet services supplied at a hotel with a room tariff above ₹7,500 attract 18% GST with ITC. Stand-alone banquet halls and in-restaurant events are at 5% without ITC. If you supply outside catering (food cooked in your kitchen, delivered to another premises), that is also 5%.
Configuring your POS
- Create tax groups: GST 5% (food, no ITC), GST 18% (hotel restaurant or banquet), Excise (alcohol, state-specific rate).
- Tag every menu item to one tax group. Do not use a single catch-all rate.
- Test: ring up a bill with two food items and one drink. Confirm the GST and excise lines print separately.
- Export your monthly GST report from the POS in GSTR-1 format. Confirm the CA can import it directly.
10 years building POS and payments for Indian restaurants. Previously at Razorpay & Petpooja.