Running a restaurant in India means dealing with GST every single month. Yet most small restaurant owners across Chennai, Bengaluru, Mumbai, and Delhi are either filing late, using the wrong rate, or missing Input Tax Credit (ITC) claims worth thousands of rupees each year.
This guide covers the five most important GST rules every restaurant owner should understand — written in plain language, with examples using actual rupee amounts.
1. Understand CGST vs SGST vs IGST
India's GST system splits tax between the central and state governments. When you sell to a customer in the same state (intra-state), the GST is collected as two equal halves:
- CGST (Central GST) — goes to the Government of India
- SGST (State GST) — goes to your state government (Tamil Nadu, Maharashtra, Karnataka, etc.)
When you sell across state lines (inter-state) — for example, supplying food to a caterer in another state — the entire tax is collected as IGST (Integrated GST).
For 99% of restaurant bills in India, you will see CGST + SGST on every invoice because you are serving customers in the same state.
Example: A restaurant bill of ₹1,000 with 5% GST = ₹50 total tax. On the invoice: CGST ₹25 + SGST ₹25. Both lines are legally required. A bill showing only "GST 5%" without the split is technically non-compliant and can cause issues during a GST audit.
Most billing software automatically handles this split. If you are generating invoices manually in Excel or Word, double-check that both CGST and SGST are shown as separate line items on every bill.
2. Know Your Correct GST Rate
This is the area where most restaurant owners make mistakes. The GST rate for restaurants is not one flat rate — it depends on the type of restaurant and the context in which you operate.
| Restaurant Type | GST Rate | ITC Eligible? |
|---|---|---|
| Standalone restaurant (without AC or with AC) | 5% | No |
| Restaurant inside a hotel where room tariff < ₹7,500/night | 5% | No |
| Restaurant inside a hotel where room tariff ≥ ₹7,500/night | 18% | Yes |
| Outdoor catering services | 5% | No |
| Food delivery via Swiggy / Zomato | 5% | No (aggregator collects) |
| Packaged food items (biscuits, snacks etc.) | Varies by HSN code | Depends |
Common mistake: Some restaurant owners continue to charge 18% GST thinking it is the standard rate. The correct rate for most standalone Indian restaurants is 5% with no ITC. Over-charging GST means collecting more money from customers than you are supposed to, which creates liability with the GST department.
If you are unsure about your applicable rate, confirm with your CA or check the CBIC website (cbic-gst.gov.in). Alternatively, a reliable GST billing software will have the correct rates pre-configured so you never have to manually look them up.
3. Use the Right HSN / SAC Code
Every item on your menu (food and beverages) needs an HSN (Harmonised System of Nomenclature) code or SAC (Services Accounting Code) on the invoice. This is mandatory for businesses with annual turnover above ₹5 crore. Even if you are below that threshold, using correct codes protects you during audits.
For restaurant services, the key SAC code is:
SAC 996331 — Services provided by restaurants, cafes and similar eating facilities including takeaway services. This covers most food served in a restaurant setting.
Common food item HSN codes:
| Item | HSN Code | GST Rate |
|---|---|---|
| Restaurant food (dine-in / takeaway) | 996331 | 5% |
| Fresh milk | 0401 | Nil |
| Packaged drinking water (up to 20L) | 2201 | Nil |
| Aerated / soft drinks (Pepsi, Coke etc.) | 2202 | 28% + 12% cess |
| Alcoholic beverages | 2203–2208 | Excluded from GST (state VAT applies) |
Note: Alcoholic beverages are outside the GST framework. State VAT applies on alcohol, not GST. Make sure your billing software separates food (GST) from liquor (state tax) correctly.
4. File GSTR-1 and GSTR-3B on Time
GST compliance has two main monthly filings for restaurant businesses:
- GSTR-1 — Details of outward supplies (your sales invoices). Due on the 11th of every month.
- GSTR-3B — Summary return + tax payment. Due on the 20th of every month.
If you are under the QRMP (Quarterly Return Monthly Payment) scheme (turnover below ₹5 crore), you file GSTR-1 quarterly but pay GST monthly via PMT-06.
Cost of late filing: Late fee is ₹50 per day (₹25 CGST + ₹25 SGST) for returns with a tax liability. For nil returns it is ₹20 per day. Plus 18% interest per annum on unpaid tax from the due date. A small restaurant that is 30 days late pays ₹1,500+ in late fees alone — before the interest.
Practical tips to avoid late filing:
- Set calendar reminders for the 8th (GSTR-1 prep) and 18th (GSTR-3B prep) of every month.
- Reconcile your billing software sales report with your GSTR-1 before filing.
- Keep digital copies of all purchase invoices from suppliers — these are needed to claim ITC if you are in the 18% category.
- Use billing software that can export your sales data directly in the GSTR-1 format, so you or your accountant do not have to re-enter data.
5. Use Billing Software to Prevent GST Errors
The single most effective way to avoid all of the above mistakes is to use GST-compliant billing software that is configured specifically for your type of restaurant.
Here is what good billing software does automatically:
- Applies the correct GST rate (5% or 18%) based on your restaurant category
- Splits tax into CGST + SGST (or IGST for inter-state) on every invoice
- Prints HSN/SAC codes on every bill
- Separates GST items from non-GST items (like alcohol)
- Generates a GST summary report at the end of the month
- Exports data in GSTR-1 and GSTR-3B compatible formats
When billing is done manually (written bills, Excel, or non-GST software), human errors creep in: wrong rates, missing CGST/SGST split, wrong HSN codes, or bills without invoice numbers. Each of these is a potential audit trigger.
Touch4Bill is used by 100+ restaurants across Chennai and Tamil Nadu. It handles CGST/SGST calculation, invoice generation, and GSTR report export automatically. Contact us for a free demo to see how it works for your restaurant.
Quick Recap — 5 GST Tips for Restaurants:
- Show CGST + SGST as separate line items on every intra-state bill
- Confirm your applicable rate — most restaurants pay 5% with no ITC
- Use SAC code 996331 for dine-in/takeaway food service
- File GSTR-1 by the 11th and GSTR-3B by the 20th every month
- Use GST billing software to eliminate manual errors
Touch4Bill is Chennai's leading cloud POS and billing software, trusted by 100+ restaurants and retail stores across Tamil Nadu. Our team writes practical guides to help Indian business owners manage billing, GST, and operations more efficiently.