Complete Guide to GST Billing for Restaurants in India (2026 Rules)
S
Shybiz Team
June 28, 2026
GST compliance is one of those things that restaurant owners know is important but rarely understand fully. Most rely on their CA to figure it out — which works until a GST officer walks in and asks why your invoices are missing mandatory fields.
This guide gives you a clear, practical understanding of how GST works for restaurants in India, what your bills must include, and how the right billing software handles all of this automatically.
GST Rates for Restaurants: The Simple Version
Here is what you need to know in 2026:
Restaurants without AC (any turnover): 5% GST without Input Tax Credit (ITC)
Restaurants with AC (any turnover): 5% GST without ITC
Restaurants in hotels with room tariff up to ₹7,500: 5% GST without ITC
Restaurants in hotels with room tariff above ₹7,500: 18% GST with ITC
Outdoor catering services: 5% GST without ITC (changed from 18% in recent updates)
Cloud kitchens and food delivery: 5% GST without ITC
For 90% of restaurant owners, the rate is simple: 5% GST with no ITC.
What does "without ITC" mean? It means you charge customers 5% GST but you cannot claim credit for the GST you paid on your purchases (raw materials, equipment, rent). The government gave restaurants the lower 5% rate as a trade-off for giving up ITC.
What Your GST Invoice Must Include
Every bill your restaurant generates must contain these mandatory fields:
1. Your restaurant name, address, and GSTIN
2. Invoice number (sequential, no gaps)
3. Date of invoice
4. Customer name and address (for B2B transactions above ₹2.5 lakhs)
5. HSN/SAC code — For restaurant services, use SAC code 9963
6. Taxable value (food value before GST)
7. GST rate and amount — Broken into CGST + SGST (for local sales) or IGST (for inter-state)
8. Total amount
9. Place of supply
For a bill of ₹1,000 (food value), the tax breakdown looks like:
- Taxable amount: ₹1,000
- CGST @ 2.5%: ₹25
- SGST @ 2.5%: ₹25
- Total: ₹1,050
Common GST Mistakes Restaurants Make
Charging service charge and applying GST on it: Service charge is optional and should be clearly mentioned as voluntary. GST should be calculated on the food value, not on the service charge. However, if service charge is mandatory, GST applies on it too.
Not maintaining sequential invoice numbers: GST rules require sequential numbering with no gaps. If your billing system allows manual bill numbers, it is easy to accidentally skip numbers — which raises red flags during audits.
Incorrect HSN/SAC codes: Using the wrong code can lead to penalties. Restaurant services fall under SAC 9963. Takeaway food (considered a supply of goods) may use HSN codes for the specific food item, though most restaurants apply SAC 9963 uniformly.
Not filing returns on time: Late filing attracts a penalty of ₹50 per day (₹25 CGST + ₹25 SGST) up to a maximum of ₹5,000 per return.
Mixing up CGST/SGST and IGST: If your restaurant and customer are in the same state, charge CGST + SGST. If different states (e.g., catering in another state), charge IGST.
How ShyBiz Handles GST Automatically
When you set up ShyBiz, you configure your GST details once:
- Enter your GSTIN
- Set the applicable GST rate (5% for most restaurants)
- Enter your state code
- Set SAC code (9963)
After that, every bill automatically:
- Calculates the correct CGST + SGST split
- Includes all mandatory invoice fields
- Generates sequential invoice numbers with no gaps
- Stores all invoices digitally for easy retrieval during audits
- Generates monthly GST reports that your CA can directly use for filing
You never have to manually calculate GST, worry about invoice formatting, or hunt for old bills during audits. Everything is stored, organized, and exportable.
Service Charge vs GST: Know the Difference
Many restaurant owners confuse service charge with GST. They are completely different:
GST is a government tax — mandatory, fixed rate, paid to the government
Service charge is a restaurant-imposed fee — optional for the customer, retained by the restaurant
As of 2026, restaurants can levy a service charge, but they must clearly state that it is voluntary and can be removed on the customer request. The Central Consumer Protection Authority has issued guidelines making service charge optional.
If you do charge service charge, your bill should show it as a separate line item:
Food value: ₹1,000
Service charge (10%): ₹100
Subtotal: ₹1,100
CGST @ 2.5%: ₹27.50
SGST @ 2.5%: ₹27.50
Total: ₹1,155
GST is applied on ₹1,100 (food + service charge) if service charge is mandatory. Consult your CA for your specific situation.
GST Returns for Restaurants
Depending on your turnover, you need to file:
Turnover up to ₹5 crore: GSTR-1 (quarterly) and GSTR-3B (quarterly) under the QRMP scheme, or monthly if you opt out
Turnover above ₹5 crore: GSTR-1 and GSTR-3B monthly
ShyBiz generates reports that map directly to GSTR-1 format — showing invoice-wise details, total taxable value, and tax amounts. Your CA can use these reports directly without asking you to dig through paper bills.
Composition Scheme: Is It Right for Your Restaurant?
Restaurants with turnover up to ₹1.5 crore can opt for the Composition Scheme. Under this:
- You pay GST at 5% (same rate as regular)
- You cannot collect GST from customers (it comes from your margin)
- You file returns quarterly instead of monthly
- Much simpler compliance
However, there are limitations:
- You cannot claim ITC
- You cannot do inter-state sales (no catering in other states)
- You must mention "Composition Taxable Person" on your bills
For small restaurants with simple operations, the Composition Scheme reduces paperwork significantly.
Bottom Line
GST compliance for restaurants is straightforward once you understand the basics: 5% rate, proper invoice format, sequential numbering, and timely filing. The complexity is not in the rules — it is in executing them consistently across hundreds of bills per day.
That is exactly why your billing software matters. With ShyBiz, GST compliance is built into every transaction. You focus on running your restaurant; the software handles the tax math, invoice formatting, and report generation.
