1. Understand the food business model first
“Restaurant business” is not one single operating model. Before deciding tax treatment, identify what the business actually supplies, who contracts with the customer, who collects consideration, and whether the outlet operates from specified premises under the applicable rate notification.
Dine-in restaurant
Food and beverage service at the restaurant premises. Usually treated as restaurant service, subject to the applicable rate entry and conditions.
Cloud kitchen
Food prepared for delivery or takeaway without conventional dine-in seating. A cloud kitchen can still provide restaurant service; the label “cloud kitchen” alone does not decide the GST rate.
Catering / event supply
Food supplied as catering at a venue or event may fall under outdoor catering or a related entry. Do not automatically apply the ordinary restaurant rate.
Business-model classification table
| Activity | Questions to ask | Accounting / GST focus |
|---|---|---|
| Dine-in | Is it restaurant service? Are premises “specified premises” under the current definition? | Rate, no-ITC condition where applicable, POS invoice and daily sales. |
| Takeaway / self-pickup | Is the supply in substance restaurant service or a separately supplied packaged good? | Menu, invoice description, composite supply analysis and applicable rate. |
| Orders through an ECO | Is the underlying supply restaurant service covered by Section 9(5)? | Separate platform order ledger, ECO tax reporting and settlement reconciliation. |
| Sale of packaged goods | Is it a separate supply of goods, such as a separately marketed packaged product? | HSN, goods rate, labelling and invoicing; assess facts rather than assuming restaurant service. |
| Outdoor catering | Who provides the catering, at what premises, and is venue rental bundled? | Applicable catering entry, composite supply and premises-related rate conditions. |
2. GST rates: read the entry and conditions together
The CBIC rate schedule for Heading 9963 distinguishes restaurant service other than at “specified premises” from restaurant and other accommodation/food services at specified premises. The commonly encountered entries include 5% without input tax credit for restaurant service other than at specified premises, and 18% for the specified-premises category, subject to the exact notification wording and definitions applicable to the transaction.
| Category (broad summary) | Common GST treatment shown in rate schedule | Key condition / caution |
|---|---|---|
| Restaurant service other than at specified premises | 5% (2.5% CGST + 2.5% SGST, or 5% IGST) | Rate entry carries a condition that ITC on goods and services used in supplying the service is not taken. |
| Restaurant service at specified premises | 18% (9% CGST + 9% SGST, or 18% IGST) | Confirm the current meaning of “specified premises,” including relevant hotel accommodation thresholds and declarations/notifications. |
| Outdoor catering outside specified premises | Often 5% in the stated category | Entry has conditions and exclusions; certain specified-premises suppliers / locations are treated differently. |
| Outdoor catering at specified premises or by covered suppliers | May fall in the 18% category | Review supplier and premises conditions and whether premises rental is bundled. |
Do not use the table as an automatic rate engine. Rate classification can depend on premises, supplier status, nature of service, applicable notification date, and whether the supply is restaurant service, outdoor catering, or goods. Keep a copy of the rate notification and your classification memo in the tax file.
Illustration: local restaurant sale
Assume an ordinary restaurant, not at specified premises, supplies restaurant service for a taxable value of ₹10,000, and the 5% entry applies. Output GST is ₹500 (₹250 CGST + ₹250 SGST for an intra-State supply). If the applicable category is 18%, the tax on the same taxable value would be ₹1,800. The illustration does not determine which category a real outlet falls into.
3. Food delivery platforms and Section 9(5)
Restaurant service supplied through an electronic commerce operator (ECO) and notified under Section 9(5) is a special compliance case. For covered restaurant-service orders, the ECO is liable to pay GST as if it were the supplier liable for tax on that service. This changes who pays and reports the GST on the covered platform transaction; it does not mean that the restaurant should ignore the sale in its books.
Who does what?
| Party | Practical responsibility for covered restaurant-service orders |
|---|---|
| Restaurant / cloud kitchen | Record gross customer sales and platform orders, maintain order-level evidence, reconcile platform reports, and report the supplies in the manner prescribed for supplier-side reporting. Do not charge/pay the same output GST again where liability is placed on ECO under Section 9(5). |
| E-commerce operator | Pay GST on the notified service under Section 9(5), maintain and report prescribed details, and provide usable order / tax reports to the restaurant. |
| Restaurant accountant | Reconcile the restaurant's order data with the ECO statement, identify cancelled/refunded orders, commission invoices, tax withheld/collected and settlement bank credits. |
Example: platform order
Assume the customer order value for restaurant service is ₹1,000 before GST, the restaurant falls in a covered 5% category, and the order is supplied through an ECO covered by Section 9(5). The ECO's applicable tax liability on that covered restaurant service is ₹50. The restaurant should record ₹1,000 as revenue (subject to its accounting policy and discount/agent arrangement), separately account for platform commission and other charges, and reconcile the platform's tax report. The example assumes no customer discount, refund, or other adjustment.
Do not confuse these three amounts
- Restaurant-service GST under Section 9(5): paid by the ECO on covered platform restaurant service.
- Platform commission / advertising / convenience services billed to restaurant: separate services supplied to the restaurant, with GST on the platform's tax invoice where applicable.
- Delivery service: determine the provider, contractual arrangement, registration status and current notification. A platform's restaurant-service tax treatment does not automatically determine GST on every delivery or logistics fee.
4. GST registration and threshold: assess the supplier and activity
Registration should be assessed by the legal person, aggregate turnover, State/Union Territory, nature of supplies and relevant statutory provisions—not simply by the brand name or the number of kitchens.
- Aggregate turnover is computed on the statutory PAN-India basis, subject to the exclusions and inclusions in the CGST Act.
- Suppliers of services covered by Section 9(5) through an ECO may receive threshold exemption in the circumstances described in CBIC's sectoral FAQ; the ECO itself does not receive a threshold exemption for its Section 9(5) liability.
- Do not assume that every restaurant selling through an app is exempt from registration. Direct sales, other taxable activities, interstate issues, entity-level turnover and other provisions must be checked.
- For a company operating in multiple States, each required GST registration has its own return and reconciliation responsibilities, while aggregate turnover is assessed under the statutory definition.
5. Input tax credit: the major issue for restaurant finance teams
For restaurant service taxed under the 5% entry, the rate condition generally requires that ITC of tax charged on goods and services used in supplying that service is not taken. Therefore, an invoice showing GST does not automatically mean the restaurant can claim ITC.
Typical purchase categories
| Expense / purchase | Practical review | Control |
|---|---|---|
| Food ingredients, beverages and consumables used in 5% restaurant service | ITC generally not availed where the no-ITC rate condition applies. | Code as non-creditable / cost component in purchase ledger. |
| Kitchen equipment, furniture and appliances | Check use, tax category, blocked-credit provisions and the restaurant rate condition. Do not claim solely because it is capital equipment. | Asset-wise ITC decision and tax invoice link. |
| Rent, utilities, repairs and maintenance | Review actual service, recipient GSTIN, use and applicable no-ITC condition. | Separate outlet cost centres and blocked-credit mapping. |
| Aggregator commission / advertising / software charges | Check whether credit is legally available in the recipient's circumstances. A 5% no-ITC restaurant service regime may restrict credit used for that service. | Match platform tax invoice to monthly statement and classify ITC correctly. |
| Mixed business activities | If the entity has both eligible-credit and no-credit activities, apply the statutory rules for common inputs/input services and maintain defensible allocation. | Document activity-wise turnover, direct attribution and common-credit computation. |
ITC decision workflow
- Identify the exact outward supply to which the input relates.
- Check the rate notification condition for that outward supply.
- Check Section 16 eligibility, possession of tax invoice, receipt, supplier reporting/other conditions applicable for the period, and payment conditions.
- Check blocked credits under Section 17(5) and Rules 42/43 where relevant.
- Record a reason code: eligible, blocked, no-ITC rate condition, common-credit allocation, or pending documentation.
6. Discounts, coupons, packaging, cancellations and refunds
Restaurant POS and aggregator settlement reports may show menu price, restaurant-funded discount, platform-funded discount, customer convenience fee, packaging charge, delivery fee, cancellation, refund and commission. These fields must not be netted together without understanding the contract and valuation rules.
Discount review
- Determine who funds the discount and whether it is reflected in the transaction value or meets the statutory conditions for exclusion from value.
- Keep scheme terms, platform campaign reports, customer invoice, settlement statement and any credit note together.
- Platform-funded promotional support may be accounted for differently from a discount granted by the restaurant. Read the agreement and the actual invoice flow.
- Do not reduce taxable value merely because the net bank settlement is lower than the menu price.
Packaging and delivery charges
Whether packaging or other charges form part of the value of restaurant service, are a separate supply, or are collected by another party depends on the facts and contractual structure. Review how the customer invoice describes the charge, who supplies it, and whether it is incidental to or bundled with the restaurant service. Avoid a blanket rule that every packaging charge is separately taxable at a different rate.
Cancellation and refund controls
- Mark each order as completed, cancelled before preparation, cancelled after preparation, partially refunded or fully refunded.
- Obtain the ECO's adjustment / refund report and identify whether GST adjustment is reflected by the party liable under the relevant law.
- Issue credit notes only where legally and factually appropriate, within applicable time limits and with required particulars.
- Keep evidence for wastage, food prepared, customer refund, platform reimbursement and any insurance/compensation claim.
7. Accounting entries: record sales, fees and settlements separately
Use the following as an illustrative bookkeeping architecture, not a mandatory chart of accounts. The precise entry depends on whether the platform acts as collection agent, how the contract allocates discounts and taxes, and the entity's accounting policy.
A. Direct restaurant sale, assumed 5% restaurant service
Cr Restaurant Revenue ₹10,000
Cr Output CGST ₹250
Cr Output SGST ₹250
For this illustration, the restaurant is directly liable for output tax, the transaction is intra-State, and ₹10,000 is the taxable value.
B. Covered ECO order where ECO pays tax under Section 9(5)
Cr Restaurant / Platform Sales ₹1,000
Record commission and other services from the platform based on the platform's invoice, not by silently reducing revenue:
Dr GST on Commission ₹Y (only where credit is legally available; otherwise expense/cost)
Cr ECO / Platform Payable ₹(X + Y)
On settlement:
Dr Platform Charges / Other Recoverable Items ₹as supported
Cr ECO Settlement Receivable ₹Gross amount cleared
Reconcile the entry to the platform's gross order report, tax report, fee invoice, refund/discount reports and bank advice. Do not treat the platform's net bank transfer as gross revenue.
8. Worked monthly reconciliation: cloud kitchen using an aggregator
Illustrative month; amounts are hypothetical and chosen only to demonstrate reconciliation. Assume the restaurant has 5% restaurant service for its covered category, and the platform is liable for GST on the covered restaurant service under Section 9(5).
| Platform report line | Amount (₹) | Reconciliation treatment |
|---|---|---|
| Completed orders, gross restaurant value before adjustments | 5,00,000 | Agree to order-level report and POS / kitchen order system. |
| Restaurant-funded discounts supported by scheme terms | (20,000) | Check whether and how discount affects value and sales presentation. |
| Customer refunds / cancellations approved | (10,000) | Match order IDs, refund evidence and tax adjustment treatment. |
| Illustrative adjusted settlement base | 4,70,000 | Control total only; tax value must be determined under actual valuation rules. |
| Platform commission (assumed, before GST) | (75,000) | Match monthly tax invoice and contract rate. |
| GST on commission (illustrative 18%) | (13,500) | Credit only if eligible; otherwise include in cost/expense. |
| Other platform charges (assumed) | (5,000) | Match to supporting invoices / reports. |
| Illustrative net remittance before other adjustments | 3,76,500 | Agree to bank statement and settlement advice. |
Important: This table is a settlement bridge, not a legal GST valuation computation. Actual customer tax value, GST payable by ECO, refund treatment, platform-funded promotions, delivery fees and restaurant revenue must be derived from order-level invoices, the platform contract and applicable law. Do not calculate ECO tax as a percentage of a net settlement amount.
Monthly reconciliation bridge
± approved cancellations / refunds / discounts (classified by funder)
= order-level sales control total
→ reconcile to restaurant books and applicable GSTR reporting
− platform commission, GST on platform fees, other invoiced charges
± settlement adjustments / reserves / chargebacks
= net platform remittance
→ agree to bank credits
Exception report columns
Maintain Order ID, order date, outlet/GSTIN, invoice number, gross menu value, discount funder, cancellation/refund status, tax category, ECO tax report amount, commission invoice number, settlement batch, bank credit date, variance and resolution owner.
9. GSTR-1, GSTR-3B and records: build a return-ready process
Do not assume that because the ECO pays tax under Section 9(5), the restaurant has no reporting or recordkeeping work. The supplier-side reporting treatment and return tables must be checked against the current return instructions and portal schema for the relevant tax period. The restaurant should preserve transaction-level evidence and make sure the same output tax is not paid twice.
Return preparation workflow
- Close POS and order-management data by outlet and GSTIN.
- Separate direct sales, ECO restaurant-service orders, catering, goods and other service streams.
- Reconcile ECO sales and Section 9(5) reports with order data; separately identify amounts on which the ECO is liable.
- Reconcile output tax liability for direct and other taxable supplies to sales ledger and invoice series.
- Review eligible ITC, no-ITC rate conditions, blocked credit and common-credit reversals.
- Prepare GSTR-1 and GSTR-3B using the current GST portal instructions; retain workings, reviewer sign-off and filed acknowledgements.
- Reconcile books, returns, electronic liability/credit ledgers and payment challans.
Documents to retain
- POS daily summaries, item-wise menu master and tax mapping.
- Tax invoices, bills of supply where applicable, credit notes and refund records.
- ECO agreements, order-level exports, monthly tax reports, commission invoices and settlement advices.
- Purchase invoices, ITC eligibility tracker and blocked-credit analysis.
- GSTR-1 / GSTR-3B workings, filed returns, payment evidence and reconciliation sign-offs.
10. Multi-outlet chains, franchises and central kitchens
Multi-State restaurant group
Map each outlet to its legal entity, GSTIN, State, place of supply, POS terminal, bank settlement account and aggregator merchant ID. A common brand name does not make separate GST registrations one registration for return filing.
Central kitchen supplying outlets
Determine whether the central kitchen and outlets are the same legal person, separate registrations of the same person, or distinct legal entities. For supplies between distinct persons, evaluate Schedule I and valuation provisions, including whether consideration is charged. Maintain transfer documentation, delivery challans / invoices as applicable, and stock movement records.
Franchise model
Separate the franchisee's restaurant sales from the franchisor's royalty, brand fee, management fee, software fee, supply of ingredients and equipment. Each stream can have a different supplier, tax classification, invoice and ITC treatment. Review the franchise agreement and intercompany/related-party arrangements.
Central procurement
For ingredients, packaging and common services procured centrally, document which GSTIN is the recipient, where goods are delivered, who uses the services, and whether cross-charge or distinct-person rules apply. Avoid booking all vendor invoices in a head-office GSTIN without checking recipient and use.
11. Monthly close checklist for the accountant
- Outlet-wise sales reconciled to POS, cash, card, UPI and aggregator orders.
- Restaurant, catering, goods and other revenue streams classified separately.
- Current rate and premises classification confirmed and documented.
- Section 9(5) ECO orders separately tagged; platform tax report obtained.
- Gross order value reconciled to cancellations, refunds and discount funding.
- Aggregator commission and other platform invoices booked separately.
- Net settlement batches matched to bank credits; unexplained differences assigned.
- Purchase ITC reviewed against rate conditions, Sections 16/17 and Rules 42/43 as relevant.
- Credit notes, refunds and cancelled orders supported by order-level evidence.
- GSTR-1 and GSTR-3B workings reviewed against ledgers and current portal instructions.
- Return filing, tax payment and ledger reconciliation completed and archived.
- Management dashboard updated with outlet-wise revenue, discount %, food cost %, platform commission %, refund %, tax and settlement ageing.
12. Common errors and risk matrix
| Risk | Why it happens | Control / evidence |
|---|---|---|
| Paying output GST twice on ECO restaurant orders | POS treats all orders as ordinary direct sales without identifying Section 9(5). | Separate ECO order tax code and reconcile to ECO tax reports and return instructions. |
| Omitting platform sales from books | Only net settlement is recorded as revenue. | Book gross sales and separately account for fees, refunds and settlement items. |
| Claiming ITC on a 5% no-credit restaurant service | Purchase invoices are automatically posted to eligible ITC. | Use expense-level tax mapping and reviewer-approved credit eligibility. |
| Applying one rate to every food-related receipt | Restaurant service, catering, goods and specified-premises categories are not separated. | Maintain a revenue-stream classification memo and rate master. |
| Netting all discounts and refunds | Platform reports combine restaurant-funded and platform-funded schemes. | Separate by funding party, contractual terms, invoice and credit-note evidence. |
| Ignoring commission GST | Settlement statement is used instead of the platform tax invoice. | Book and reconcile platform invoices; decide ITC eligibility separately. |
13. Frequently asked questions
1. Does a cloud kitchen automatically charge 5% GST?
No. The term cloud kitchen does not decide the rate. Confirm whether the supply is restaurant service, whether specified-premises or another category applies, and the current rate-entry conditions.
2. Who pays GST on restaurant orders placed through a food delivery app?
For restaurant service notified under Section 9(5), the ECO is liable to pay GST on the covered service. Confirm that the transaction is within the notified service and review the platform's reporting for the period.
3. Should the restaurant record only the amount received from the platform?
Generally, no. The accounting should reconcile gross customer orders and separately identify discounts, refunds, commissions, taxes on platform services and other settlement adjustments. The exact revenue presentation depends on contracts and accounting policy.
4. Can a restaurant claim GST paid on ingredients and rent?
Not automatically. The 5% restaurant-service entry includes a no-ITC condition. Review the outward supply category, the rate condition, statutory ITC rules and whether any mixed eligible-credit activity exists.
5. Is GST on platform commission the same as GST on restaurant orders?
No. Commission is a separate service billed by the platform to the restaurant. Its invoice, tax and recipient-side ITC eligibility should be reviewed separately from Section 9(5) output tax on restaurant service.
6. Are packaging and delivery charges always taxed at the restaurant rate?
Not necessarily. Determine who supplies the charge, whether it is part of a composite restaurant service, and the contractual and invoicing facts. Delivery service can have its own treatment.
7. Does Section 9(5) mean the restaurant need not file GST returns?
No. Registration and return obligations depend on the entity's full facts. The restaurant still needs books, records, reporting analysis and reconciliation, even where the ECO pays tax on specified platform restaurant services.
8. What should be reconciled every month?
POS/order data, ECO order and tax reports, commission invoices, discounts/refunds, settlement batches, bank credits, sales ledgers, ITC tracker and GST returns.
14. Related resources on GST Reconciliation
Explore related practical tools and explainers on your website:
- GST Reconciliation — Home
- GST Knowledge Hub and practical compliance resources
- GST Reconciliation tools and compliance utilities
For legal verification, refer to the current CGST Act and Rules, applicable rate notifications under Heading 9963, Notification No. 17/2021-Central Tax (Rate) and corresponding IGST notification, CBIC Circular No. 167/23/2021-GST dated 17 December 2021, and current GST portal return instructions. Circulars and notifications should be read with later amendments and clarifications.