‘GST ON RestauRant’

The term ‘Restaurant’ has not been defined under GST law. In common parlance,
‘restaurant’ can be understood as a place where people pay to sit and eat meals that are
cooked and served within the premises.

The taxability of the services provided by the restaurants and the scope of the term
‘restaurants’ have been elaborated under GST regime. It is no longer only a place where
people go, sit and eat. Various other terms such as canteen, mess, takeaways, catering,
etc., have been incorporated in restaurant services. Unlike Service Tax law, there are no
restrictions on whether the restaurant is an air conditioned one or non-air conditioned
and whether it is serving alcohol or not.

GST Rates on Accomodation, Food & Beverage Services:

Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, Serial No. 7 under
Heading No. 9963 (Accommodation, food and beverage services), prescribes the
following GST rates:-

Description Applicable GST

Rate
Food services provided by restaurants including takeaway 5% with No ITC
facility (both air-conditioned and non-air conditioned )

Any food/drink served at cafeteria/canteen/mess operating on 5% with No ITC

contract basis in office, industrial unit, or by any institution or
by any other person on basis of contractual agreement which
is not event based or occasional

Restaurant services provided by restaurants located within a 5% with No ITC

hotel featuring room tariff less than Rs. 7,500

Restaurant services provided by restaurants located within a 18%

hotel featuring room tariff of Rs. 7,500 and above

Meals/food services provided by Indian Railways/IRCTC or 5% with No ITC

their licensees both in trains or at platforms

Food services in a premises arranged for organizing function 18%

along with renting of such premises

Food services at exhibition, events, conferences, outdoor & 18%

indoor functions that are event based or occasional in nature

Other Accommodation, food and beverage services 18%

 Food ordered through e-commerce operator:

Cloud kitchens, delivery kitchens and or food delivery applications would be covered by
the definition of e-commerce operators.

Most of these e-commerce operators enter into contracts with the restaurant owners and
offer restaurant search and delivery services through their website or mobile
application. Customer places order by using their website or apps. Aggregators are
responsible to take customer order from the restaurant premises and deliver the food to
end consumer.

The entire transaction in relation to food ordered via e-commerce operator is divided
into 2 parts:-

1. Food is delivered by the e-commerce operator’s hired/ contracted

delivery boy from restaurant premises to place of buyer. Bill of restaurant
is handed over to the buyer

- In this case GST charged by the restaurant will be rate of restaurant services, i.e.,
either 5% or 18% as the case may be.

2. Delivery fee charged by e-commerce operator from buyers

- E-commerce operator will charge GST at 18% from customers on delivery charges
collected from the customer and it shall not form part of restaurant services but would
be classified under HSN 9968, being a part of postal & courier services.

Given below is the summary of food ordered by A in Delhi through XYZ.com (e-
commerce operator):-

Particulars Amount
Burger ordered (1* 129) 129.00
Restaurant Handling Charges 29.00
Delivery Charge 16.00
GST – CGST 3.95
- Delhi GST
3.95
Promo Code: 40% Discount (51.60)
Total 130.30

Let us analysis how GST is charged and at what rate:-

 Particulars Amount GST @ Analysis
5%
Burger 129 6.45 Rate of 5% is levied on burger and
Restaurant 29 1.45 handling charges/ Packing charges being a
Handling Charges ‘composite supply’ of restaurant services
Total 158 7.90
Delivery Charges 16 - This amount is inclusive of GST. These
charges are recovered by XYZ.com and
does not form a part of restaurant services.
Applicable GST rate of postal services, i.e.,
18% is levied on this amount.
Promo-(40% (51.60) - It is a form of discount offered by
Discount) XYZ.com. Since it is not offered by
restaurant itself, hence, GST is levied on
the actual value of burger and handling
charges without giving effect to discount
allowed.

Tax implications on Tip given to delivery boy:

Sometimes consideration in the form of ‘Tip’ is given to the person who delivers the food
parcel, which is over and above the total amount. Such amount is not fixed and is not
mandatorily required to be paid. ‘Tip’ given by customer depends on the satisfaction
level of the customer, time taken by the delivery boy to deliver the respective order.
Therefore, it is classified as transaction in money (neither goods nor services) and will
not be considered as a part of restaurant or delivery services and, hence, GST is not
applicable on this amount.

Also Read:
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 GST on Second Hand Goods - Margin Scheme