If you run a restaurant, café, or hotel in India, chances are GST compliance is as important as your menu or service quality. Since the rollout of Goods and Services Tax (GST) in 2017, the food and hospitality industry has had to navigate evolving rules, changing tax slabs, and mandatory registration requirements. Whether you own a family-run dhaba, a quick-service chain, or a luxury hotel, understanding GST is critical to staying profitable and legally compliant.
GST Registration Rules for Restaurants and Hotels
The most common question business owners ask is: Do I need to register for GST? The answer depends on turnover and operations:
- Turnover threshold: Restaurants and hotels with an annual turnover above ₹20 lakh (₹10 lakh in North-Eastern and hill states) must register under GST.
- Food delivery apps: Even if turnover is lower, registration is mandatory if the business partners with online aggregators like Swiggy, Zomato, or Uber Eats.
- Hotel businesses: GST applies if the room tariff per day exceeds ₹1,000. Lower tariffs are exempt.
👉 Example: A dhaba in Punjab earning ₹12 lakh yearly with only walk-in customers may avoid GST. But the same dhaba listed on Zomato would need compulsory registration.
GST Rates for Hotels and Restaurants
GST rates vary based on the type of service and establishment:
- Standalone restaurants (non-AC/AC, dine-in or takeaway): 5% GST (without Input Tax Credit).
- Restaurants inside hotels with room tariffs above ₹7,500: 18% GST (with Input Tax Credit).
- Hotels:
- Room tariff ₹1,000 or less → Exempt
- ₹1,001 – ₹7,500 per night → 12% GST
- Above ₹7,500 per night → 18% GST
👉 Example: Ordering a thali from your neighbourhood mess attracts 5% GST, while booking a five-star hotel room in Delhi with ₹8,000 tariff attracts 18%.
Input Tax Credit (ITC) Rules
One major change after 2017 is ITC restrictions:
- Standalone restaurants: Cannot claim ITC at the 5% rate.
- Hotel restaurants (with 18% GST): Can avail ITC, making it beneficial for larger establishments with higher operational costs.
This distinction often determines pricing strategies for chains like Barbeque Nation versus standalone eateries.
Compliance and Penalties
Non-compliance with GST rules can invite:
- 10% penalty of the tax due (minimum ₹10,000).
- Higher penalties for deliberate tax evasion.
- Risk of delisting from food delivery platforms.
For businesses relying heavily on online orders, this can mean losing significant revenue.
Why GST Matters for Restaurants and Hotels
Beyond tax liability, GST compliance adds value to businesses:
- Credibility: Customers trust bills with clear GST charges.
- Digital partnerships: Delivery apps and OTAs (like MakeMyTrip) insist on GSTIN.
- Business expansion: Franchises, investors, and banks favour compliant businesses.
Conclusion: GST Is the New Cost of Doing Business
For India’s hospitality industry, GST is here to stay. From OYO hotels in tier-2 cities to McDonald’s outlets in metro malls, compliance ensures smooth operations and customer trust. Small owners may see GST as paperwork, but in reality, it’s the gateway to scaling, securing partnerships, and competing with bigger brands.
If you’re planning to open or expand a hotel or restaurant, make GST registration part of your business plan — not an afterthought.
