5 GST mistakes restaurants make every month
Written by Tax Paramarsh editorial teamReviewed by Tax Paramarsh GST deskLast updated 3 October 2026Applies to: GST rules in force on 3 October 2026
Restaurants have simpler GST than most businesses — and that is exactly why small mistakes go unnoticed for months. These five come up again and again.
- Paying GST on delivery app orders. For orders through food delivery apps, the app pays the GST. Paying it again on those sales is money lost — but they still have to be reported.
- Claiming credit at the 5% rate. Most restaurants charge 5% without input tax credit. Claiming credit on supplies means reversing it later, with interest.
- Using the wrong rate. Restaurants in hotels where the declared room tariff is above ₹7,500 a night charge 18% with credit; others usually charge 5%. Check which applies before billing.
- Mixing alcohol into GST. Alcohol is outside GST and taxed by the state. Bill and record it separately.
- Missing reverse charge on rent. Commercial rent paid to an unregistered landlord can attract GST under reverse charge for registered businesses.
A quick monthly fix
Split sales into dine-in, takeaway and app orders, reconcile app statements, and check rent and other services for reverse charge before filing.
Key takeaways
- Don’t pay GST again on app orders.
- No credit at 5% — don’t claim it.
- Keep alcohol out of GST billing.
Common questions
Do cloud kitchens follow the same rules?
Yes — cloud kitchens are taxed as restaurant services, usually at 5% without credit.
Is a restaurant’s service charge taxable?
If charged, it forms part of the value of the supply and GST applies to it.
Related
General information, reviewed on 3 October 2026 — not advice for your specific case. GST rules, forms and due dates change; talk to us before acting.