GST on Restaurant Expenses: Rent, Software, Purchases, ITC

Every restaurant owner in India learns one GST rule early: the food bill carries 5%. The second rule takes longer to learn, and it decides how much the business really keeps. At 5%, a restaurant cannot claim back the GST it pays on its own costs. Its rent, billing software, the commission it pays Swiggy or Zomato and the butter in its kitchen all carry GST that stays a cost. This guide goes through each expense: the rate on it, whether credit is allowed, how much it adds to a month's costs and how to plan for it. It ends with what the 57th GST Council's recent recommendation on restaurant credit does, and does not, change.

Written on 17 October 2026. The rates are from the GST Council's compilation of service rates (heading 9963 for restaurants), the 56th GST Council's rate changes in force since 22 September 2025, and the notifications named in each section. The worked example uses round figures; its assumptions are stated. Where an expense depends on a product's exact classification, check its HSN or SAC code on CBIC's rate finder. This explains the law; it is not advice on a particular business.

The answer in six numbers

5% — GST on restaurant service, with no input tax credit · 18% — GST on restaurant service in a hotel with rooms above ₹7,500 a night, with credit · 18% — GST on commercial rent, software, platform commission and professional fees · 0% or 5% — GST on most packaged food ingredients since September 2025 · ₹1.5 crore — the turnover limit for composition · ₹40,320 — GST a sample café pays on a month's expenses and cannot claim back.

The rule that decides everything: 5% means no input tax credit

The rate on restaurant service depends on where it is served:

Where the food is served	GST	Input tax credit
A standalone restaurant, café, dhaba, bakery-café or cloud kitchen, dine-in or takeaway	5%	Not allowed
Outdoor catering by a caterer not linked to a high-tariff hotel	5%	Not allowed
A restaurant in "specified premises": a hotel that charged more than ₹7,500 a night for any room in the previous year, or has opted in	18%	Allowed

The 5% comes with a condition written into the rate entry: "credit of input tax charged on goods and services used in supplying the service has not been taken". The entry calls it "a mandatory rate", so a restaurant cannot choose 18% with credit instead. The 56th GST Council added that a standalone restaurant "cannot declare itself as a 'specified premises'" to reach the 18% option. From 1 April 2025, Notification 05/2025-CT(R) defines specified premises for each financial year in three ways:

a hotel that charged more than ₹7,500 a day for any room in the previous year;
a hotel that filed a declaration between 1 January and 31 March of the previous year;
a new registrant that declared within 15 days of applying.

Takeaway, home delivery and cloud kitchens are restaurant service too. Circular 164/20/2021 explains that restaurant service covers food "whether for consumption on or away from the premises", and that this "would thus cover services provided by cloud kitchens/central kitchens".

What that means in practice: for a standalone restaurant, the GST on its expenses is not a "credit waiting to be claimed". It is part of the cost of every plate, like the rent itself.

Expense by expense: the rate, and whether credit is allowed

Expense	GST	Credit for a 5% restaurant?	Note
Rent of the shop or premises	18%	No	Reverse charge if the landlord is unregistered (below)
Billing, POS, inventory or accounting software	18%	No	IT software licences and online services
Platform commission and fees (Swiggy, Zomato)	18%	No	On the platform's own service to the restaurant
Accountant, consultant, marketing and other professional fees	18%	No
Franchise fee or royalty	18%	No	A service, taxed separately from the food
Butter, ghee, sauces, pasta, coffee, chocolate, packaged namkeen	5%	No	Cut from 12% or 18% on 22 September 2025
UHT milk, packaged paneer or chena, roti, paratha and other Indian breads	Nil	Nothing to claim	Cut from 5% on 22 September 2025
Tableware and kitchenware	5%	No	Cut on 22 September 2025
Air conditioners, refrigerators, dishwashers	18%	No	Cut from 28% on 22 September 2025

Service rates: GST Council compilation, headings 9972 (real estate, 18%), 9973 (IT software, 18%) and 9983 (professional and business services, 18%). Goods: the 56th GST Council's rate changes. Fresh, unprocessed produce is largely exempt; check each item's code on CBIC's rate finder. The rate on each appliance, with its HSN code, is here.

A café's month, worked out

Take a café in a rented shop, not in a hotel, on the regular GST scheme. It sells ₹6,00,000 a month to customers who walk in or take away, and ₹3,00,000 through delivery apps. Its expenses for the month, before GST, are below. The platform commission is assumed at 20% of app sales; commissions vary by contract.

Expense in the month	Amount before GST	GST rate	GST paid
Rent, to a registered landlord	₹1,20,000	18%	₹21,600
Platform commission	₹60,000	18%	₹10,800
Butter, ghee, sauces, coffee and other packaged ingredients	₹80,000	5%	₹4,000
UHT milk, packaged paneer, breads	₹40,000	Nil	₹0
Accountant's fee	₹15,000	18%	₹2,700
Billing and inventory software	₹4,000	18%	₹720
Crockery and kitchenware	₹10,000	5%	₹500
GST paid on expenses, not claimable			₹40,320

₹30,000GST it collects on ₹6 lakh of walk-in sales, at 5%, and pays in cash

₹0GST it pays on ₹3 lakh of app sales: the platform pays it

₹4.84 lakhGST in a year's expenses that stays a cost (₹40,320 × 12)

The café passes on ₹30,000 of GST collected from its customers. It absorbs ₹40,320 of GST in its costs. The second figure is the one that belongs in the menu price.

Why not charge 18% and claim the credit instead? Suppose the same café could. It would charge ₹1,08,000 of GST on the same ₹6 lakh of sales, claim up to ₹40,320 against it, and pay ₹67,680 in cash. Its customers would pay ₹78,000 more in tax every month. That trade is why the law keeps standalone restaurants at 5% without credit, and refuses them the 18% option.

Rent: the expense with a trap

Commercial rent carries 18%. When the landlord is registered, the GST is on the landlord's invoice, and for a 5% restaurant it is a cost. When the landlord is not registered, the restaurant may have to pay the GST itself. Since 10 October 2024, renting of any property other than a residential dwelling by an unregistered person to a registered person is under reverse charge (Notification 09/2024-CT(R)). The tenant pays the 18% in cash, and a 5% restaurant cannot claim it back either. The rent has gone up 18% by law.

The composition exception. On the 55th GST Council's recommendation, Notification 07/2025-CT(R) of 16 January 2025 takes "a person who has opted to pay tax under composition levy" out of this reverse charge. The period from 10 October 2024 was regularised "as is where is". A restaurant on composition renting from an unregistered landlord pays no GST on the rent at all.

A café with ₹6 lakh a month of walk-in sales, renting from an unregistered landlord at ₹60,000	Regular scheme	Composition
GST on sales	₹30,000 (5%, collected from customers)	₹30,000 (5% of turnover, paid by the café; no tax shown on the bill)
GST on rent under reverse charge	₹10,800 (18%)	Nil
GST paid in the month	₹40,800	₹30,000

Assumes no app sales, to keep composition simple. A composition restaurant cannot show GST separately on its bill, so the 5% comes out of its own price.

Composition: the other route for a small restaurant

A restaurant whose aggregate turnover in the previous year was up to ₹1.5 crore (₹75 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand) may opt for composition (Notification 14/2019-CT). It then pays 2.5% central tax and 2.5% State tax on its turnover (rule 7), with no input tax credit, as before.

It gains: no reverse charge on rent from an unregistered landlord, and simpler returns.
It gives up: the right to charge GST separately on its bills, which becomes a bill of supply.
The turnover test counts app sales. Circular 167/23/2021 says a restaurant's aggregate turnover includes "the aggregate value of supplies made by the restaurant through ECOs". A restaurant selling heavily on apps reaches the limit sooner.

Whether composition suits a restaurant depends on its landlord, its customers and its app sales. Work it out with the restaurant's own figures before switching. When a small business must register for GST at all is covered here.

Swiggy, Zomato and other platforms

The platform pays the GST on app orders. Restaurant service is notified under section 9(5) of the CGST Act (Notification 17/2021-CT(R)). Circular 167/23/2021 confirms that "the tax on supplies of restaurant service supplied through e-commerce operators shall be paid by the e-commerce operator". The platform also issues the invoice to the customer.
The commission is separate. The platform's own service to the restaurant (commission, advertising, other fees) is a supply to the restaurant, invoiced with GST, usually at 18%. For a 5% restaurant that GST is a cost.
App sales still count as the restaurant's turnover for registration and composition limits, and are reported in its returns as sales through an e-commerce operator.

Who can claim input tax credit

A restaurant in specified premises, at 18%: credit on its rent, equipment, software and supplies, subject to the general blocks in section 17(5).
Outdoor catering by a caterer at or linked to specified premises, at 18%.
A business that also makes other taxable supplies, such as renting out a banquet hall or selling goods at their own rate. It may claim credit on what it buys for those supplies, split between taxable and other supplies under rules 42 and 43. Credit on what is used for 5% restaurant service still cannot be taken.

A common and costly mistake is to claim the credit that shows in GSTR-2B while charging 5%. That breaks the condition of the 5% rate. The credit must be reversed with interest, and a penalty can follow. If you charge 5% on restaurant service, leave the credit unclaimed.

What the 57th GST Council recommended for restaurants and cafés

The Council met on 8 October 2026. Two of its recommendations touch restaurant credit. Both take effect only when notified or when the CGST Act is amended.

1. Limited credit "in the same line of business". The Council recommended allowing "limited input tax credit in the same line of business, for the supply of restaurant/outdoor catering services, hotel accommodation services for value up to Rs. 7500 per unit per day, and gym/fitness services". This is to work "in the same manner as is currently available for passenger transportation services, tour operator services and renting of motor vehicles services". For a tour operator, the rate entry allows only the credit "of input service in the same line of business (i.e. tour operator service procured from another tour operator)". Read the same way for restaurants:

Likely claimable: GST on restaurant or catering service bought from another caterer. For example, a caterer that hands part of a wedding order to another caterer and receives a 5% bill could claim that GST.
Not covered: rent, software, platform commission, ingredients and equipment. These are not "the same line of business", so the café in the worked example would still absorb its ₹40,320 a month.

The exact wording will be in the notification; check it when issued.

2. Outdoor catering off the blocked list. Section 17(5) today blocks credit on outdoor catering for the business that buys it. The Council recommended removing that restriction. This helps a caterer's corporate clients, not the caterer itself. Once the Act is amended, a company ordering outdoor catering for its business could claim the GST on the caterer's bill. Ask business clients for their GSTIN and show it on the invoice. The release names outdoor catering; it does not name restaurant meals in general.

Other recommendations of the same meeting help small restaurants as businesses:

no late fee on a return filed within the month where turnover is up to ₹5 crore;
no show-cause notice where the tax involved is under ₹10,000;
a 5% penalty on an honest mistake paid within 30 days;
an optional annual return with quarterly payment for businesses selling only to consumers.

Every decision of that meeting, with examples, is here.

A practical checklist for a restaurant owner

Price the menu with the GST in your costs included: rent, commission, software and fees at 18%, most packaged ingredients at 5%.
Ask every landlord for a GSTIN. If there is none, budget 18% of the rent under reverse charge, unless you are on composition.
Do not claim credit from GSTR-2B while charging 5% on restaurant service.
Count app sales in your turnover for the registration and composition limits.
Compare the regular scheme with composition once a year, before the year starts.
Caterers: show your business clients' GSTIN on invoices. Watch for the notification on same-line credit for catering bought from other caterers.

To work out the GST inside any bill, or the price before tax, use the GST calculator: enter the amount, pick 5% or 18%, and say whether the amount includes tax. The GST return dates are in the compliance calendar.

Frequently Asked Questions

What is the GST rate for restaurants in India? 5% without input tax credit for a standalone restaurant, café, cloud kitchen or takeaway. Restaurants in a hotel that charged more than ₹7,500 a night for any room in the previous year, or that has opted in, charge 18% with credit.

Can a restaurant claim input tax credit on rent? Not if it charges 5% on restaurant service. The 5% rate carries the condition that credit on goods and services used in supplying the service is not taken. A restaurant in specified premises, charging 18%, can claim it.

Is GST payable on the rent of a restaurant shop? Yes, 18%. If the landlord is registered, it is on the landlord's invoice. If the landlord is unregistered, a registered restaurant pays it under reverse charge, unless the restaurant has opted for composition.

Can a standalone restaurant opt for 18% GST with input tax credit? No. The 56th GST Council clarified that a stand-alone restaurant cannot declare itself a specified premises, so the 18% option is not available to it.

Can a café claim GST on its billing software or coffee machine? Not if it charges 5% on restaurant service. Software carries 18% and most machines 18%; for a 5% café both are costs.

Who pays GST on Swiggy and Zomato orders? The platform. Restaurant service supplied through an e-commerce operator is taxed under section 9(5), so the operator pays the 5% and issues the invoice. The restaurant still counts the sales in its turnover.

Can a restaurant claim the GST on Swiggy or Zomato commission? Not when it charges 5% on restaurant service. The commission carries GST, usually 18%, which stays a cost.

Can a restaurant opt for the composition scheme? Yes, with turnover up to ₹1.5 crore in the previous year (₹75 lakh in eight listed States). It pays 5% of turnover, cannot charge GST on its bills, takes no credit, and is outside reverse charge on rent from unregistered landlords.

What did the 57th GST Council recommend for restaurants? Limited input tax credit in the same line of business, meaning restaurant or catering service bought from another supplier. It also recommended removing outdoor catering from the list of blocked credits, which helps caterers' business clients. Rent, software and ingredients are not covered.

What is the GST on butter, ghee and sauces bought by a restaurant? 5%, since 22 September 2025, down from 12% or 18%. UHT milk, packaged paneer and Indian breads are nil.

Rates and conditions are as in force on 17 October 2026, and the 57th Council's recommendations are not yet notified. Classification of a particular item can change its rate; check its code. This explains the law; it is not tax advice on any business.

Sources

The rules and figures in this article can be checked against these official sources.