How to Set Up GST for Your Restaurant — Step by Step 2026

Does Your Restaurant Need GST Registration?

Yes, if your annual turnover exceeds Rs 20 lakh (Rs 10 lakh in special category states like the Northeast and Himachal Pradesh). Even a small dhaba doing 200 covers daily at Rs 150 average crosses Rs 20 lakh within 7 months. Register before opening — not 3 months later — because voluntary registration enables input tax credit claims, corporate catering eligibility, and professional credibility with partners.

The short answer: almost certainly yes. Under current GST law, any business with an aggregate turnover exceeding ₹20 lakh per annum (₹10 lakh for special category states like the Northeast, Himachal Pradesh, and Uttarakhand) must register for GST. For restaurants, even a small dhaba doing 200 covers per day at an average ticket of ₹150 crosses ₹20 lakh within 7 months. If you are serving food for money, you need GST registration.

Even if your turnover is below the threshold, voluntary GST registration has benefits: you can claim input tax credit on purchases, your business appears more professional to customers and partners, and you are eligible for government tenders and corporate catering contracts that require GST-registered vendors. For restaurants planning to start operations in India, GST registration should happen before you open your doors — not as an afterthought three months later.

Step-by-Step GST Registration Process

GST registration is entirely online through the GST portal (gst.gov.in). Here is the exact process:

Step 1: Gather Required Documents

Before you start the online application, collect these documents: PAN card of the business or proprietor, Aadhaar card of the authorised signatory, proof of business address (electricity bill, rent agreement, or property tax receipt), bank account details (cancelled cheque or bank statement), photograph of the proprietor/partners/directors, and the business registration certificate (partnership deed, incorporation certificate, or shop establishment licence). For restaurants, you will also need your FSSAI licence number, though this is not mandatory for GST registration itself.

Step 2: Register on the GST Portal

Visit gst.gov.in and click "Register Now" under the Taxpayers section. Select "New Registration" and fill in Part A with your legal name, PAN, email, and mobile number. You will receive an OTP on both email and mobile — verify both. The portal generates a Temporary Reference Number (TRN) which you will use to complete Part B of the application.

Step 3: Complete the Application (Part B)

Log in with your TRN and fill in the detailed application form GST REG-01. This includes 10 sections: business details, promoter/partner information, authorised signatory, principal place of business, additional place of business (if you have multiple outlets), goods and services details (select "Restaurant Service" under SAC code 996331), bank account details, state-specific information, and Aadhaar authentication. Upload all required documents in the specified formats (JPEG/PDF, under 1MB each).

Step 4: Verification and GSTIN Issuance

After submission, sign using DSC (Digital Signature Certificate) for companies, or EVC (Electronic Verification Code) via Aadhaar OTP for proprietorships and partnerships. The application goes to a GST officer for verification. If everything is in order, you receive your GSTIN (GST Identification Number) within 3-7 working days. If the officer raises queries (notice in GST REG-03), you have 7 days to respond with clarifications or additional documents. Once approved, your 15-digit GSTIN is active and must be displayed at your restaurant entrance.

What GST Rate Applies to Your Restaurant in 2026?

Most standalone restaurants pay 5% GST without input tax credit (ITC) — this applies whether your restaurant is AC or non-AC. Restaurants inside hotels with room tariffs above Rs 7,500 pay 18% GST with ITC. Outdoor catering services pay 5% without ITC. BillFeeds automatically applies the correct GST rate per item category on every bill, eliminating manual calculation errors that trigger GST audit notices.

This is where most restaurant owners get confused. GST rates for restaurants are not one-size-fits-all. The rate depends on your restaurant type, location, and whether you opt for input tax credit.

5% GST Without Input Tax Credit (Most Common)

The majority of restaurants in India fall under this category. Whether your restaurant is air-conditioned or non-AC, if you are a standalone restaurant (not inside a hotel with room tariff above ₹7,500), you pay 5% GST on food and beverages. However, you cannot claim input tax credit (ITC) on your purchases — raw materials, equipment, rent, or services. This means whatever GST you pay on ingredients, packaging, or kitchen equipment is a cost to you, not a credit against your output GST. For most restaurants with straightforward supply chains, the 5% rate without ITC is simpler and often cheaper overall.

18% GST With Input Tax Credit

Restaurants that are part of hotels with room tariffs exceeding ₹7,500 per night are charged 18% GST on food services, but they can claim full input tax credit on all business purchases. Outdoor catering services also attract 18% GST with ITC (reduced from the earlier 18% without ITC). If your restaurant has significant capital expenditure — expensive kitchen equipment, large premises with high rent, imported ingredients — the 18% rate with ITC can actually work out cheaper because you recover GST paid on all inputs. This requires careful calculation with your accountant.

Composition Scheme: The Simplified Option

Restaurants with annual turnover up to ₹1.5 crore can opt for the GST Composition Scheme. Under this scheme, you pay a flat 5% GST (2.5% CGST + 2.5% SGST) on your total turnover without the complexity of item-wise tax calculation. The advantages: simplified quarterly filing (instead of monthly), no requirement to issue detailed tax invoices, and reduced compliance burden. The disadvantages: no input tax credit, you cannot make inter-state sales (no catering orders from other states), and your customers cannot claim ITC on your invoices (matters only for corporate clients). For small restaurants and dhabas, the Composition Scheme is often the best option.

How Often Must Restaurants File GST Returns?

Restaurants file GSTR-1 (sales) monthly by the 11th or quarterly under QRMP scheme, GSTR-3B (summary) monthly by the 20th, and annual return GSTR-9 by December 31st. For restaurants under Rs 5 crore turnover, the quarterly QRMP scheme reduces filings to 4 per year. BillFeeds auto-categorises B2B and B2C sales data and generates GSTR-1-ready reports, cutting filing preparation from hours to minutes.

Once registered, you must file regular GST returns. The frequency and type depend on your registration category.

GSTR-1: Sales Return (Monthly/Quarterly)

GSTR-1 reports all your outward supplies (sales) for the period. For restaurants under the regular scheme, this is filed monthly by the 11th of the following month. For those under the QRMP scheme (Quarterly Return Monthly Payment, available for turnover up to ₹5 crore), GSTR-1 is filed quarterly. You must report: B2B invoices (sales to registered businesses, like corporate catering) individually, and B2C sales (individual customers) in aggregate. This is where your GST billing software becomes critical — it automatically categorises and totals your sales data for GSTR-1.

GSTR-3B: Summary Return (Monthly/Quarterly)

GSTR-3B is your summary tax return where you report total sales, total purchases, GST liability, ITC claimed, and net tax payable. For regular-scheme restaurants, this is filed monthly by the 20th of the following month. For QRMP restaurants, it is filed quarterly. The tax payment, however, is always monthly — QRMP businesses use the PMT-06 challan for the first two months and adjust in the quarterly GSTR-3B. Missing GSTR-3B deadlines attracts a late fee of ₹50 per day (₹20 for nil returns), capped at ₹5,000 per return. Over a year, late filing can cost you ₹60,000 in penalties alone.

Annual Return (GSTR-9)

All regular GST-registered restaurants must file an annual return (GSTR-9) by December 31st of the following financial year. This consolidates your monthly/quarterly returns into an annual summary. Restaurants with turnover above ₹5 crore must also get their accounts audited and file GSTR-9C (reconciliation statement). Composition scheme taxpayers file GSTR-4 annually instead.

How Bill Feeds Automates GST Compliance

Manual GST compliance for a busy restaurant is a nightmare. Tracking every invoice, categorising B2B vs B2C, calculating tax at the right rate, and preparing return data takes hours every month. This is exactly what a good POS system should handle automatically.

Bill Feeds generates GST-compliant invoices automatically on your phone. BYOD means no separate billing terminal for GST compliance — every bill your cashier creates on their phone includes the correct GST rate, HSN/SAC code, GSTIN display, and all mandatory invoice fields. At the end of the month, you export your GSTR-1 data directly from the dashboard in the format the GST portal accepts. No manual data entry, no Excel spreadsheets, no errors.

The system handles multiple GST scenarios automatically: 5% for dine-in and takeaway, 18% for catering (if applicable), and composition scheme flat rates. If your restaurant has both AC and non-AC sections (which no longer matters for GST rates, but some owners still ask), Bill Feeds applies the correct rate consistently. Every invoice includes your GSTIN, the customer's GSTIN (for B2B), SAC code 996331, and the tax breakup showing CGST and SGST (or IGST for inter-state) separately.

Input Tax Credit: Should Your Restaurant Claim It?

If your restaurant charges 5% GST (which most standalone restaurants do), you cannot claim ITC. Period. But if you fall under the 18% category or are evaluating whether to opt for it, here is what you need to know.

ITC allows you to offset GST paid on business inputs against your output GST liability. For a restaurant, inputs include: raw materials and ingredients (vegetables, meat, spices, cooking oil), kitchen equipment (ovens, refrigerators, utensils), packaging materials (takeaway containers, bags), rent (if landlord charges GST), utilities (electricity, gas — if GST-registered supplier), professional services (accountants, consultants), and technology (POS software subscriptions, internet).

To calculate whether 18% with ITC is better than 5% without ITC, use this formula: if your total input GST exceeds 13% of your sales GST (the difference between 18% and 5%), then the 18% option saves money. In practice, this typically benefits restaurants with very high raw material costs (premium dining, imported ingredients) or large capital expenditure (new kitchen equipment, renovation). For a typical restaurant spending 30-35% of revenue on raw materials and 10% on other GST-bearing expenses, the 5% route is usually cheaper. Your CA can run the exact numbers for your specific situation.

Common GST Mistakes Restaurants Make

Mistake 1: Charging service charge as GST. Service charge is not a tax — it is a voluntary charge by the restaurant. Many restaurants confusingly add a 10% service charge on top of GST, making customers think they are being double-taxed. Your bill should clearly separate: food cost, GST (with CGST/SGST breakup), and service charge (if any). Your POS should format this correctly on every invoice.

Mistake 2: Not issuing proper tax invoices. A GST tax invoice must include: restaurant name and GSTIN, invoice number (sequential, unique), date, customer details (name and GSTIN for B2B over ₹50,000), description of items with HSN/SAC codes, taxable value, GST rate and amount (CGST + SGST separately), and total. Handwritten bills on generic receipt pads are not compliant. Bill Feeds automatically generates fully compliant invoices with all mandatory fields — one tap on your phone produces a legally valid tax invoice. This BYOD billing approach ensures compliance even when your main billing counter is busy.

Mistake 3: Mixing personal and business expenses. Claiming ITC on personal purchases (family groceries bought from the restaurant's supplier account, personal phone bills) is a common audit trigger. Keep business and personal expenses strictly separate. Your POS should only record genuine business transactions.

Mistake 4: Ignoring reverse charge mechanism. If your restaurant purchases goods or services from unregistered suppliers (which is common for small farms, local markets, etc.), you may need to pay GST under the reverse charge mechanism and can then claim it as ITC (if eligible). Many restaurants miss this entirely, leading to compliance gaps during audits.

Mistake 5: Late filing and non-filing. Beyond the ₹50/day late fee, non-filing of returns for more than 2 consecutive periods can result in suspension of your GSTIN. A suspended GSTIN means you cannot issue tax invoices, which effectively shuts down your compliant billing. Set calendar reminders for every filing deadline and use your POS system's built-in reminders if available.

GST for Multiple Restaurant Outlets

If you operate multiple restaurant branches within the same state, you need only one GST registration — all branches are covered under the same GSTIN with the main branch as the principal place of business and others as additional places of business. However, if you have outlets in different states (say, one in Hyderabad and one in Bangalore), you need separate GST registrations for each state, each with its own GSTIN.

Bill Feeds supports multi-branch operations with centralised GST management. Each branch generates invoices under the correct GSTIN, and the dashboard consolidates data across branches for return filing. For restaurant chains expanding across states, this eliminates the headache of managing multiple disconnected billing systems. The BYOD approach means each new branch starts billing with zero hardware setup — staff open Bill Feeds on their phones and are compliant from order number one.

E-Invoicing: Does It Apply to Restaurants?

As of 2026, e-invoicing is mandatory for businesses with aggregate turnover exceeding ₹5 crore. If your restaurant or restaurant chain crosses this threshold, every B2B invoice must be registered on the Invoice Registration Portal (IRP) and carry a unique Invoice Reference Number (IRN) and QR code. The IRP validates the invoice and returns a signed JSON which your system must store. For most independent restaurants, this does not apply. But for large chains and catering companies, e-invoicing compliance is critical. Ensure your POS system supports e-invoicing integration before you hit the threshold.

Setting Up Your POS for GST: A Checklist

Before your restaurant starts billing, configure these GST settings in your POS:

1. Enter your GSTIN — this prints on every invoice automatically.

2. Set the correct GST rate — 5% for most restaurants, 18% for hotel restaurants, or composition rate.

3. Configure HSN/SAC codes — SAC 996331 for restaurant services. If you sell packaged goods (bottled water, packed snacks), those have separate HSN codes with different GST rates.

4. Set up CGST/SGST split — for intra-state sales (which is 99% of restaurant transactions), GST splits equally into CGST and SGST. For catering orders from other states, IGST applies instead.

5. Enable B2B invoice capture — when corporate clients provide their GSTIN, the invoice should capture it for GSTR-1 reporting.

6. Test with sample invoices — generate 3-5 test invoices and verify all fields are correct before going live.

With Bill Feeds, this entire setup takes under 10 minutes. Enter your GSTIN and select your GST category during registration, and the system handles everything else. Check the pricing page for plans that include GST reporting features.

Frequently Asked Questions