GST on restaurant bills — 5% vs 18% explained (and how to extract net price)

Quick answer: restaurant bills in India have 5% GST without input tax credit for standalone restaurants, dhabas and food courts; 18% GST with ITC in restaurants inside 5-star hotels (room tariff ≥ ₹7,500/night). To extract the net food price from a tax-inclusive bill, divide the total by 1.05 (or 1.18 for premium restaurants). Service charge is not GST and is voluntary — you can refuse to pay it.

This is one of the most consistently misunderstood Indian tax topics. Customers often assume the bill is the food price + GST + service charge, when in reality the math is more complex.

Restaurant GST rates explained

Type of restaurant	GST rate	Input Tax Credit
Standalone restaurant (AC or non-AC)	5%	Not allowed
Restaurant in hotel with room tariff < ₹7,500/night	5%	Not allowed
Restaurant in hotel with room tariff ≥ ₹7,500/night	18%	Allowed
Outdoor catering (5-star hotel)	18%	Allowed
Cloud kitchen / takeaway only	5%	Not allowed
Food court	5%	Not allowed
Pre-packaged food (Swiggy/Zomato delivery, branded)	5%	Not allowed (since Jan 2022)

The "5% without ITC" rule is the most common case — applies to almost every restaurant a normal person eats at. The restaurant pays 5% to the government and cannot claim back GST on its inputs (rent, ingredients, etc.) — which is why many small restaurants stay on this scheme.

How to extract the net food price from a bill

Reverse calculation (the formula most online calculators get wrong):

For a 5% GST inclusive bill: Net = Total ÷ 1.05

For 18% GST inclusive: Net = Total ÷ 1.18

Example: a Zomato bill shows ₹525 inclusive. The food was actually ₹500, and ₹25 was GST (5% of ₹500). It's NOT ₹525 minus 5% (that would give ₹498.75 — wrong).

The math:

• ₹525 / 1.05 = ₹500 net food price
• ₹525 - ₹500 = ₹25 GST
• ₹500 × 5% = ₹25 ✓ (verifies)

Use the GST Calculator and switch to "Extract" mode for any inclusive bill — it does this math correctly for any rate.

Service charge — not GST, not mandatory

The Department of Consumer Affairs has explicitly ruled that service charge is voluntary. Restaurants cannot:

• Add it automatically without your consent
• Refuse to seat you because you won't pay it
• Bundle it as part of the food price

If a restaurant adds 10% service charge to your bill, you can:

1. Ask for it to be removed at billing
2. Pay only the food + GST and refuse service charge
3. File a complaint with the National Consumer Helpline (1915) if they refuse

However, GST on service charge is real if you DO pay service charge. The math becomes:

• Food: ₹500
• Service charge (10%): ₹50
• Sub-total: ₹550
• GST 5% on ₹550: ₹27.50
• Final bill: ₹577.50

Service charge is added before GST, so GST is calculated on (food + service charge). This is why the same food costs more at restaurants that levy service charge — both the charge and the GST on top are extra.

Common bill formats decoded

Format 1 — Standalone restaurant:

• Food: ₹500
• CGST (2.5%): ₹12.50
• SGST (2.5%): ₹12.50
• Total: ₹525

Format 2 — Premium hotel restaurant:

• Food: ₹500
• CGST (9%): ₹45
• SGST (9%): ₹45
• Total: ₹590

Format 3 — Restaurant in another state (rare for dine-in):

• Food: ₹500
• IGST (5%): ₹25
• Total: ₹525

For intra-state (same state) sales, GST splits into CGST + SGST. For inter-state, it's a single IGST. Most dine-in is intra-state.

Liquor in restaurants — different rules

Alcohol served in restaurants is NOT under GST — it's still taxed under state VAT (sales tax), which varies dramatically:

• Karnataka: ~30% VAT on liquor
• Delhi: ~25% VAT
• Mumbai: ~20% VAT
• Goa: ~15% VAT
• Kerala: ~70%+ VAT (highest)

This is why your dinner bill has the food at 5% GST but the wine is at 25-30% VAT. The food and drink are taxed under different regimes.

Zomato / Swiggy delivery — who pays GST?

Since January 2022, Zomato and Swiggy are responsible for collecting and paying 5% GST on the orders they deliver — even for restaurants that aren't GST-registered. The customer still pays 5%, the platform remits to the government.

Delivery fees, packaging fees and platform fees that the customer pays are taxed at 18% GST (since they're "service charges from a service provider"). So your bill effectively has two GST components:

• Food: 5% GST
• Delivery + packaging + platform fees: 18% GST

Most apps don't break this down clearly; a careful look at your invoice will show it.

Use the GST calculator for any restaurant bill

Open the GST Calculator, switch to "Extract GST" mode, paste in the inclusive total, pick 5% (or 18% for 5-star), and you'll see the actual food price + the GST amount. Useful for filing expense claims, reviewing what was actually charged, or checking if a restaurant's bill is correctly composed.

FAQ

Q. Why does a small dhaba charge 5% GST when they don't seem registered? A. Restaurants with annual turnover over ₹20 lakh are required to register and charge GST. Below that, they're under the threshold and shouldn't charge GST at all. If you see a "GST charge" on a bill from a tiny dhaba without a GSTIN, that's likely just a price markup — not actual GST.

Q. Is service charge included in GST? A. Service charge is added before GST is calculated. So if you pay service charge, GST is computed on (food + service charge). If you refuse service charge (which you have the right to), GST is computed only on food.

Q. Can a restaurant charge GST on packaging? A. Standalone restaurants charging 5% GST cannot separately charge GST on packaging — it's bundled. Premium hotel restaurants under 18% can. Most online food platforms add 18% GST on packaging fees.

Q. Is GST charged on tips? A. No — voluntary tips paid directly to staff are not part of the bill and not under GST.

Q. What if a bill doesn't show GST breakdown? A. By GST law, all invoices over ₹200 must show GST breakdown (CGST + SGST or IGST) and the GSTIN of the supplier. If a bill doesn't, you can ask for a corrected one — they're legally required to provide it.