The two GST regimes a restaurant can pick
Every restaurant in India is either on the composite scheme or the regular scheme. The choice determines your rate, your bill format and whether you can claim Input Tax Credit.
| Regime | Rate | ITC | Turnover Cap |
|---|---|---|---|
| Composite Scheme | 5% (2.5% CGST + 2.5% SGST) | Cannot claim | Up to ₹1.5 crore |
| Regular (non-AC) | 5% (2.5% + 2.5%) | Cannot claim | No cap |
| Regular (AC / licensed to serve alcohol) | 5% (2.5% + 2.5%) | Cannot claim | No cap |
| Restaurant inside a hotel with room tariff ≥ ₹7,500/night | 18% (9% + 9%) | Can claim | No cap |
| Outdoor catering (standalone) | 5% or 18% based on hotel tariff link | Depends on rate | No cap |
Two important quiet facts most restaurant owners miss:
- The 5% rate for standalone restaurants was fixed to remove ITC deliberately — the regime traded the ability to claim credit for a lower headline rate. You cannot mix and match.
- The 18% rate only kicks in for restaurants operating inside hotels where any room in the property is listed at ₹7,500/night or above. A single premium suite pushes the whole restaurant into 18%.
Composite scheme vs regular: which one is right for you
If your annual turnover is under ₹1.5 crore and you're a standalone restaurant, you can opt for the composite scheme — pay a flat 5% on turnover, file quarterly instead of monthly, and skip the paperwork on ITC. You cannot issue a tax invoice under composite; you issue a bill of supply.
Under the regular scheme you invoice at 5% (or 18% if hotel-linked), still cannot claim ITC on that supply, but you file monthly and can register for other GST-taxable supplies (rent income, catering, packaged food sales) alongside.
Single-outlet restaurant under ₹1.5 crore turnover, no rental income, no packaged sales — composite scheme almost always wins on paperwork alone. Anything more complex, go regular and hire an accountant who understands hospitality.
CGST + SGST + IGST — which one applies when
Every GST transaction in India splits the tax between the Centre and the State. Which two labels appear on your bill depends purely on where the customer is registered.
- CGST + SGST — intra-state supply. Customer is in the same state as your restaurant. This is what appears on 99% of restaurant bills. If a 5%-rate restaurant sells ₹1,000, the split is ₹25 CGST + ₹25 SGST.
- IGST — inter-state supply. Customer is registered in a different state. Rare for dine-in, common for catering contracts or online food orders where the invoice is raised on a corporate GSTIN in another state. If a 5%-rate restaurant supplies ₹1,000 inter-state, the split is ₹50 IGST (no state split).
- UTGST — union-territory supplies. Same idea as SGST for the six UTs without their own legislature.
The six things a GST-compliant restaurant bill must show
A regular-scheme tax invoice for a restaurant must carry, at minimum:
- Restaurant's full legal name, address and GSTIN — printed at the top.
- Bill / invoice number — sequentially numbered, with an optional prefix (e.g. HT-26-0142). Numbering cannot reset mid-financial-year.
- Date and time of supply.
- Description of each item — quantity, unit price, taxable value.
- Tax breakup — either CGST + SGST + rates, or IGST + rate. Must appear as separate line items, not bundled.
- Total invoice value — in figures. Round-off, if applied, must appear as its own visible line.
Composite-scheme restaurants issue a bill of supply instead — same fields minus the tax breakup, and the phrase "composition taxable person, not eligible to collect tax on supplies" printed on the bill by law.
A sample compliant bill
GSTIN: 27XXXXX1234X1ZX · FSSAI: 12345678901234
Common mistakes and how they get spotted
- Charging 18% at a standalone restaurant. If your hotel isn't in scope, 5% is the rate. Charging 18% and not remitting is an easy way to lose your GSTIN registration.
- Missing the "composition taxable person" line on a composite-scheme bill. Auditors catch this on visits — the fine is real.
- Non-sequential bill numbers. Every printed bill must have a unique, monotonically increasing number. Any gap needs a reason on file.
- Bundling CGST + SGST into a single "GST 5%" line. They must appear as two separate lines with rates shown.
- Rectifying a printed bill by silently overwriting it. A corrected bill must be a new bill with its own number, referencing the original by number and reason. Never overwrite.