Restaurant GST: when you charge 5% and when you charge 18%
The composite rate versus the AC-premises rate confuses more restaurant owners than any other compliance question. Here is how to configure it once and stop thinking about it.
MantraEdge Product Team · 5 Aug 2026 · 5 min read
Ask ten restaurant owners which GST rate applies to their food bill and you will get at least three answers. The confusion is understandable: the rate depends on the type of establishment and whether input tax credit is being claimed, not on the dish.
The two common cases
Standalone restaurants generally bill food and beverage at the composite rate without claiming input tax credit. Restaurants located within specified hotel premises above a declared tariff threshold bill at the higher rate with input tax credit available. Which bucket you fall into is a property of your outlet, decided once at registration — not something a cashier should pick per bill.
- Alcohol is outside GST entirely and attracts state excise and VAT — it must be billed on a separate tax line.
- Packaged goods sold as-is (a sealed bottle, a retail pack) may follow their own rate rather than the restaurant service rate.
- Delivery and packaging charges follow the treatment of the underlying supply.
- Aggregator orders have their own tax-collection mechanics that must reconcile with your books.
Configure the outlet, not the bill
The right design is to pin the tax treatment to the outlet and the order type, then never ask a human again. In RestroMantra, each outlet is configured with its GST mode at setup. Dine-in, takeaway and delivery each carry their own pricing and tax behaviour, and the correct rate is applied at billing without captain input.
Every tax decision you leave on the POS screen is a tax decision that will be wrong during a Saturday dinner rush.
The bar problem
Mixed bills are where most systems fall over. A table orders food and alcohol together. Food sits under GST; alcohol sits under state excise and VAT. The bill has to present both correctly, and your books need to keep the two streams separate for filing. If your POS treats liquor as just another menu item with a tax rate attached, your returns will not tie out.
What good looks like at day-end
A clean day-end posts sales by tax head, separates non-GST liquor revenue, reconciles UPI and card settlements against the gateway, and leaves a cash variance note where the drawer count disagrees with expected cash. Get that right and GSTR-1 stops being a monthly panic.