Applicability of GST on Restaurants, Hotels, Fine-Dining Restaurants And Cloud-Kitchens

In this article we will talk about how GST affected the bills of restaurants, hotels and other places where we usually go out for eat something.

According to the National Restaurant Association of India’s 2019 India Food Service Report, the size of the Indian food service industry was 1,48,353 crores in 2018-19 and is forecasted to grow up to Rs 2,57,907 crores in 2022-2023 with a Computed Annual Growth Rate of 15%.

GST on Restaurants, Hotels, Fine-Dining Restaurants & Cloud-Kitchens


We never paid attention to our pre-GST bill or we don’t even pay attention to our bill now, if we noticed our pre-GST bill then there was many components which used to add in bill such as VAT, Service Tax, and Service Charge.

So let’s understand about this terms:

1. VAT:

It was taxed on the portion of your food on the bill.

2. Service Tax:

It was the tax which charged on the services which was provided by the restaurant.

3. Service Charge:

Mainly the first thing is THIS IS NOT TAX, it shouldn’t be merged with tax as it is the income of the hotels. It is applied by the restaurants and not by government. If we talk about service tax then it is the tax which was paid by customer and collected by the hotels and further it was paid to the government whereas Service Charge is collected by hotels only.

However, the rates of GST is totally different from the tax which was applicable before GST.


SR No. Types Of Restaurant GST RATE
1 Railways/Irctc 5%
2 Standalone Restaurants 5%
3 Standalone Outdoor Catering Services Or Food Delivery Service 5%
4 Restaurants Within Hotels
(Where Room Tariff Is Less Than Rs 7,500)
5 Normal/Composite Outdoor Catering Within Hotels (Where Room Tariff Is Less Than Rs 7,500) 5%
6 Restaurants Within Hotels*
(Where Room Tariff Is More Than Or Equal To Rs 7,500)
7 Fine Dining Restaurant

I) With A/C:
II) Without A/C:

8 Cloud Kitchen 18%
9 Normal/Composite Outdoor Catering Within Hotels* (Where Room Tariff Is More Than or equal To Rs 7,500) 18%

This also covers the individuals supplying catering or other services in hotels and not any hotel accommodation services, (Having room tariff of Rs. 7,500 or more).

In GST rule, the service tax and VAT amount will be add into one single rate, but you may still find service charge doing rounds on your food bill.

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Taxblock India Private Limited, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Indi View Full Profile

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October 2021