GST on restaurant services generally applies at 5% without input tax credit (ITC) for most dine-in and takeaway orders. In these cases, the restaurant charges GST directly to the customer and reports it in its returns. When food is ordered through delivery apps, the process differs slightly.
The GST rate on food is usually the same, but the platform collects and pays the tax, not the restaurants. However, restaurants must record these sales correctly and ensure the figures match their GST returns.
What is the GST treatment for each restaurant sales model?
|
Particulars |
Dine-in Sales |
Takeaway / Parcel Orders |
Delivery Through Apps (Section 9(5)) |
|
Nature of Supply |
Restaurant service (supply of service) |
Restaurant service (not sale of goods) |
Restaurant service notified under Section 9(5) |
|
Applicable GST rate |
5% (without ITC) or 18% (with ITC) |
5% (without ITC) or 18% (with ITC) |
5% (without ITC) on food |
|
ITC |
Depends on applicable rate |
Depends on applicable rate |
Not available to the restaurant |
|
Who collects GST from customers? |
Restaurant |
Restaurant |
E-commerce operator (aggregator) |
|
Who deposits GST with the government? |
Restaurant |
Restaurant |
Aggregator under Section 9(5) |
|
Invoice issuance |
Tax invoice issued by the restaurant |
Tax invoice issued by the restaurant |
Invoice issued as per 9(5) mechanism (typically by aggregator) |
|
Reporting in GSTR-1 |
Report as taxable outward supply |
Report as taxable outward supply |
Report under supplies covered by Section 9(5) |
|
Inclusion in aggregate turnover |
Included |
Included |
Included in turnover, though tax paid by the aggregator |
|
Key compliance risk |
Incorrect service charge treatment |
Misclassification as the sale of goods |
Reconciliation mismatch with aggregator statements |
How does GST classify takeaway and parcel orders?
Under GST, takeaway and parcel orders are classified as restaurant services, not as the sale of goods. Even though food is packed and collected by the customer, the transaction remains a supply of service because it involves preparation, cooking and related service elements. The presence of packaging does not change the nature of the supply. Therefore, takeaway orders attract the same GST treatment as dine-in services.
Here is how GST generally applies:
|
Type of establishment |
GST rate |
|
Standalone restaurant (AC or non-AC) |
5% |
|
Restaurant inside a hotel (room tariff below ₹7,500 per night) |
5% |
|
Restaurant inside a hotel (room tariff ₹7,500 or more per night) |
18% |
What is Section 9(5) and how does it impact restaurants?
Section 9(5) of GST governs supplies made through e-commerce operators, such as food delivery apps. Under this provision, the aggregator (like Swiggy or Zomato) is liable to collect and deposit GST on behalf of the restaurant. Restaurants do not charge GST on these orders directly, but they must report such sales separately in their returns. While the restaurant’s turnover includes these orders, it cannot claim an input tax credit for GST collected by the aggregator.
For example, if a customer orders food worth ₹1,000 through Swiggy, the 5% GST (₹50) is collected by Swiggy and remitted to the government. The restaurant receives the remaining amount after the platform’s commission is deducted. Although the restaurant includes this sale in its turnover, it does not pay GST on it.
How should restaurants handle GST for dine-in, takeaway and app sales together?
Each channel generates different types of transactions and mixing them can lead to errors, misstatements, or audit issues. Restaurants should start by segregating sales by channel in their accounting system or POS software. This ensures dine-in, takeaway and app orders are tracked separately.
Next, it is essential to reconcile daily sales with bank deposits, app statements and commissions. Discounts, promotional offers and cancellations should be recorded against the correct channel. Proper allocation of overheads and operating costs per channel helps measure true profitability and avoids skewed reporting.
Finally, consistent and organised records enable accurate monthly reporting, easier compliance checks and faster audits, giving restaurant owners clarity on revenue streams and operational performance.
Conclusion
GST on restaurant services is mostly the same for dine-in and takeaway orders. The rate depends on the type of restaurant and how it is classified under GST. The main difference comes with delivery app orders, where the platform is responsible for collecting and paying the GST instead of the restaurant.
For restaurants, staying compliant means identifying each type of order correctly, keeping proper records and matching delivery app data with GST returns. Clear classification and regular reconciliation help prevent errors and make day-to-day GST reporting much smoother. Using TallyPrime can simplify this process, ensuring your restaurant stays compliant effortlessly.
