Running a restaurant is not just about food, customers and sales. Behind every successful restaurant is a strong accounting system that tracks daily sales, food costs, inventory, wastage, salaries, supplier payments, GST, income tax, online delivery commissions and cash flow.

Restaurant accounting can become complicated because a single business may have several types of transactions:

• Dine-in sales

• Takeaway sales

• Online food-delivery sales

• Catering

• Beverages

• Alcohol sales

• Discounts and complimentary items

• Service charges

• Delivery-platform commissions

• Supplier purchases

• Employee expenses

• Rent and utilities

On top of this, restaurants need to correctly handle GST and income-tax compliance.

This guide explains the major accounting, GST and tax rules for restaurants in India, along with practical accounting methods that restaurant owners can use to maintain accurate books.

Important: GST and income-tax treatment can depend on the restaurant's business model, location, entity type, turnover and nature of supply. Always verify the applicable rules for the relevant financial/tax year before filing returns.

What Is Restaurant Accounting?

Restaurant accounting is the process of recording, classifying and analysing all financial transactions related to a restaurant.

It includes:

• Recording daily sales

• Recording purchases

• Tracking food inventory

• Recording wastage

• Recording staff salaries

• Recording rent and utilities

• Recording online-platform commissions

• Reconciling cash and card payments

• Recording GST

• Preparing financial statements

• Calculating taxable business income

• Managing tax compliance

A restaurant should ideally maintain accounting records daily, rather than waiting until the end of the month.

The reason is simple: restaurants deal with a high volume of small transactions. Even a small daily discrepancy can become a significant amount over an entire year.

Why Proper Accounting Is Important for Restaurants

Restaurant businesses generally operate with relatively tight margins.

A restaurant can have high sales but still generate poor profits because of:

• Food wastage

• Excessive food costs

• High delivery commissions

• Poor inventory control

• Staff costs

• Rent

• Electricity and gas

• Discounts

• Unrecorded cash expenses

• Theft or leakage

• Incorrect GST accounting

Proper accounting helps the owner understand not only how much the restaurant sells, but also how much it actually earns.

For example:

Restaurant A

Monthly sales: ₹15 lakh

Food cost: ₹5 lakh
Salary: ₹2.5 lakh
Rent: ₹1.5 lakh
Utilities: ₹70,000
Delivery commissions: ₹1 lakh
Other expenses: ₹80,000

The owner needs accurate accounting to determine the actual operating profit after considering all relevant expenses and taxes.

GST on Restaurant Services

GST is one of the most important tax areas for restaurant owners.

The current CBIC rate schedule provides 5% GST without input tax credit for restaurant service other than at specified premises. The rate schedule separately provides an 18% rate for restaurant service at specified premises, subject to the applicable conditions.

Therefore, restaurant owners should not simply assume that every food-related transaction has the same GST treatment.

The exact treatment can depend on:

• Type of restaurant

• Whether it is located at specified premises

• Hotel-related status

• Nature of catering activity

• Nature of the particular supply

• Whether alcohol is being supplied

• Whether the business is under the composition scheme

5% GST on Regular Restaurant Services

For a typical restaurant operating outside specified premises, restaurant service is generally taxed at:

GST = 5%

This is generally:

• CGST: 2.5%

• SGST: 2.5%

for intra-State supplies.

The important condition is that the concessional 5% rate is without input tax credit.

Example

Suppose taxable restaurant sales are:

₹10,00,000

GST at 5%:

₹10,00,000 × 5% = ₹50,000

For an intra-State supply:

• CGST = ₹25,000

• SGST = ₹25,000

The restaurant's accounting system should separately track the output GST liability.

What Does "Without ITC" Mean?

ITC means Input Tax Credit.

Normally, a GST-registered business can use eligible GST paid on purchases and expenses to reduce its output GST liability.

However, where restaurant service is taxed at the applicable 5% rate without ITC, the restaurant cannot claim input tax credit on goods and services used for that restaurant service.

This is one of the most important points in restaurant accounting.

Example

Suppose a restaurant pays:

• ₹20,000 GST on equipment

• ₹10,000 GST on eligible services

• ₹30,000 GST on other business purchases

If the restaurant's outward restaurant service is under the 5% without-ITC category, it cannot simply deduct this ₹60,000 as ITC against its restaurant GST liability.

The accounting system therefore needs to correctly identify ITC eligibility instead of automatically treating every purchase GST amount as recoverable.

Restaurant GST and Hotel Restaurants

Restaurants operating within hotels require additional attention.

The current GST rate schedule distinguishes restaurant services at specified premises from restaurant services outside specified premises. The applicable rules for hotels also depend on the value of accommodation and the applicable option/conditions for the relevant financial year.

Therefore, a hotel restaurant should not automatically apply the same GST setup used by a standalone restaurant.

Before configuring the billing software, the business should determine:

1. Whether the premises qualifies as specified premises.

2. The applicable hotel accommodation conditions.

3. The GST rate applicable to the restaurant service.

4. Whether ITC is available.

5. Whether an applicable option needs to be exercised.

GST on Takeaway Food

Takeaway food supplied by a restaurant can generally fall within restaurant service when the transaction qualifies as such.

The GST Council has clarified that restaurant service includes relevant takeaway supplies, and current GST treatment should be determined according to the applicable rate notification and classification.

This means the POS system should not create inconsistent tax treatment merely because the customer consumes the food outside the restaurant.

GST on Food Delivery Apps

Online delivery has changed restaurant accounting significantly.

Restaurants commonly receive orders through platforms such as food-delivery applications.

For restaurant services supplied through an e-commerce operator, the GST mechanism under Section 9(5) applies: the e-commerce operator is liable to pay GST on the notified restaurant service supplied through the platform.

CBIC clarified that this mechanism applies from 1 January 2022 and that the e-commerce operator issues the invoice for the restaurant service.

However, the restaurant should still account for those sales in its books.

CBIC specifically clarified that restaurant supplies made through e-commerce operators are included in the restaurant's aggregate turnover for GST purposes.

Important accounting point

Suppose:

Online order value = ₹1,000
Delivery platform commission = ₹200
Amount settled to restaurant = ₹800

The restaurant should not simply record ₹800 as sales.

The accounting records should capture the appropriate gross sales, platform charges/commission, taxes and settlement based on the actual transaction and contractual documents.

This is important for:

• Revenue reporting

• Profit calculation

• GST turnover

• Reconciliation

• Income-tax reporting

GST on Alcohol in Restaurants

Alcoholic liquor for human consumption is outside the GST levy.

CBIC explains that alcoholic liquor for human consumption is excluded from GST, and State taxation continues to apply.

Therefore, a restaurant selling alcohol can have two different tax treatments:

Food and other GST-taxable supplies

GST applies according to the relevant GST classification and rate.

Alcoholic liquor

GST does not apply to the alcohol itself; applicable State taxes such as VAT/excise-related requirements may apply.

This creates an important accounting requirement:

Do not combine GST-taxable restaurant sales and alcohol sales into one undifferentiated sales account.

The POS and accounting system should separately track:

• Food

• Non-alcoholic beverages

• Alcohol

• GST

• State taxes where applicable

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Restaurant Composition Scheme

Eligible small restaurant businesses may consider the GST composition scheme.

For restaurant service under the composition scheme, the GST Council's published guidance states that restaurants can pay GST at 5% of turnover, subject to the conditions of the scheme. The published guidance specifies an eligibility turnover limit of ₹1.5 crore, with a lower limit for specified special-category States.

Under composition:

• GST is paid at the prescribed composition rate.

• ITC cannot be claimed.

• A tax invoice is not issued in the normal manner; a bill of supply is used.

• GST cannot generally be collected separately from the customer.

• Various eligibility restrictions apply.

A restaurant should therefore compare the composition scheme with regular GST registration before selecting the option.

Regular GST vs Composition Scheme

Particular	Regular GST	Composition Scheme
Tax mechanism	Normal GST	Presumptive/concessional
Restaurant rate	Generally 5% outside specified premises, subject to applicable rules	5%
ITC	Depends on applicable rate; 5% restaurant service is without ITC	Not available
Tax collected separately	Yes, where applicable	Generally no
Tax invoice	Yes	Bill of supply
Compliance	Higher	Generally simpler
Eligibility	Subject to GST registration/rules	Subject to composition conditions
Interstate restrictions	Depends on normal GST rules	Composition restrictions apply

The composition scheme should not be selected solely because the rate appears attractive. The restaurant should consider its customers, purchasing pattern, business expansion plans and compliance requirements.

GST Registration for Restaurants

A restaurant must evaluate GST registration based on the applicable registration threshold and other compulsory-registration provisions.

The registration analysis should consider:

• Aggregate turnover

• State of operation

• Nature of supplies

• Inter-State transactions

• E-commerce arrangements

• Other mandatory-registration conditions

Restaurant owners should not confuse the GST registration threshold with the composition scheme turnover limit.

They are separate concepts.

GSTR-1 and GST Returns

A regular GST-registered restaurant needs to maintain accurate outward-supply records for GST reporting.

GSTR-1 is the statement of outward supplies filed electronically by registered taxpayers making taxable supplies, subject to the applicable exclusions and filing scheme.

For restaurant accounting, the underlying data should reconcile with:

• POS sales

• Cash sales

• Card sales

• UPI sales

• Online delivery sales

• Credit sales, if any

• GST invoices

• Credit notes

• Debit notes

• Discounts

A difference between POS sales and GST return figures can create compliance problems.

Restaurant Accounting for Cash, Card and UPI Sales

Restaurants often accept multiple payment methods.

Your accounting system should separately reconcile:

Cash

Daily physical cash should be compared with:

Opening cash + cash sales − cash expenses = expected closing cash

Card

Reconcile:

POS card sales → bank settlement → merchant charges

UPI

Reconcile:

UPI sales → bank statement → settlement amount

Online Delivery

Reconcile:

Platform order report → restaurant sales records → commission → taxes/adjustments → bank settlement

This reconciliation should be performed regularly.

Daily Sales Reconciliation

One of the most important restaurant accounting controls is a daily sales reconciliation.

A useful daily report can contain:

Particular	Amount
Dine-in sales	₹
Takeaway sales	₹
Online delivery sales	₹
Cash sales	₹
Card sales	₹
UPI sales	₹
Discounts	₹
Refunds	₹
GST	₹
Other charges	₹
Net sales	₹

The exact structure can be customised according to the restaurant's POS system.

The purpose is to make sure that every rupee appearing in the POS system is accounted for somewhere in the financial records.

Accounting for Food Purchases

Food ingredients are one of the largest expenses for most restaurants.

Purchases may include:

• Rice

• Flour

• Vegetables

• Fruits

• Meat

• Fish

• Eggs

• Dairy products

• Cooking oil

• Spices

• Beverages

• Packaging materials

These purchases should be properly classified and supported by invoices.

A restaurant should avoid recording every purchase directly as an expense without considering inventory.

For businesses maintaining inventory accounting, purchases should flow through the appropriate inventory and cost-of-sales system.

Food Inventory Management

Inventory control is critical because food is perishable.

Restaurants should track:

Opening stock + Purchases − Closing stock = Consumption

This can then be compared with sales and expected food usage.

For example:

Opening food inventory = ₹2,00,000
Purchases = ₹5,00,000
Closing inventory = ₹1,50,000

Estimated consumption:

₹2,00,000 + ₹5,00,000 − ₹1,50,000
= ₹5,50,000

This number can be compared with food sales to calculate the restaurant's food-cost ratio.

Accounting for Food Wastage

Food wastage is a major issue in restaurant businesses.

Wastage can occur because of:

• Spoilage

• Over-preparation

• Expired stock

• Kitchen mistakes

• Damaged ingredients

• Customer returns

• Preparation loss

• Poor inventory management

Restaurants should maintain a wastage record.

Example

Date	Item	Quantity	Reason	Estimated Cost
05 Sept	Chicken	5 kg	Spoilage	₹2,000
07 Sept	Vegetables	8 kg	Excess purchase	₹800
10 Sept	Prepared food	15 portions	Overproduction	₹1,200

This allows management to identify recurring problems.

Food Cost Percentage

One of the most useful restaurant accounting metrics is Food Cost %.

A simple calculation is:

Food Cost % = Food Cost ÷ Food Sales × 100

Example

Food cost = ₹4,00,000
Food sales = ₹10,00,000

Food Cost %:

₹4,00,000 ÷ ₹10,00,000 × 100
= 40%

The acceptable ratio varies by restaurant type, menu and business model, so there is no universal "correct" percentage.

The important point is to monitor the trend.

If food cost suddenly increases from 32% to 42%, the owner should investigate.

Restaurant Expenses That Should Be Tracked

A restaurant may have dozens of expense categories.

Common categories include:

Direct Costs

• Food ingredients

• Beverages

• Packaging

• Kitchen consumables

Employee Costs

• Salaries

• Wages

• Overtime

• Incentives

• Employee benefits

Occupancy Costs

• Rent

• Maintenance

• Common-area charges

Utilities

• Electricity

• Gas

• Water

• Internet

• Telephone

Operating Costs

• Cleaning materials

• Pest control

• Repairs

• POS software

• Accounting software

• Marketing

• Delivery-platform charges

Professional Costs

• Accounting fees

• Audit fees

• Legal fees

• Consultancy

Correct classification makes financial reporting much more useful.

Accounting for Online Delivery Commissions

Food-delivery platforms may charge:

• Commission

• Advertising charges

• Platform fees

• Delivery-related charges

• Promotional adjustments

• Other contractual charges

These should be separately tracked instead of simply reducing sales.

Example

Gross online sales: ₹3,00,000
Platform commission: ₹60,000
Other eligible platform charges: ₹10,000

Net settlement may be:

₹2,30,000

But accounting should distinguish the sales revenue from the platform expenses rather than treating the settlement amount as the restaurant's gross revenue.

This gives management a clearer picture of:

• Sales

• Platform dependency

• Commission percentage

• Net contribution from delivery orders

Accounting for Discounts and Offers

Restaurants frequently provide:

• Coupon discounts

• Loyalty discounts

• Festival offers

• Happy-hour discounts

• Online-platform discounts

• Complimentary meals

These should be recorded consistently.

The POS system should distinguish between:

Gross selling price → Discount → Taxable value → GST → Final amount

Do not allow staff to create arbitrary discounts without proper authorisation.

A strong restaurant POS should maintain an audit trail showing:

• Original amount

• Discount

• Reason

• Authorised employee

• Final bill amount

Accounting for Complimentary Food

Restaurants sometimes provide complimentary food to:

• Customers

• Influencers

• Staff

• Business partners

• VIP guests

• Owners

Complimentary consumption should not disappear from the inventory records.

The business should maintain appropriate internal records so that the reduction in inventory can be explained.

A monthly complimentary-food report can be useful for management.

Service Charge and Restaurant Accounting

Service charge is often confused with GST.

The Central Consumer Protection Authority issued guidelines stating that restaurants and hotels should not automatically add service charge by default and that consumers should be informed that it is voluntary and optional. The guidelines also address the treatment of service charge and GST on the bill.

From an accounting perspective, a restaurant should clearly distinguish:

• Food sales

• GST

• Service charge, where lawfully and voluntarily collected

• Tips/gratuity

• Other charges

Do not treat service charge as a government tax.

CBIC also states that service charge is not a statutory levy imposed by the Government.

Accounting for Tips and Gratuity

Tips paid voluntarily by customers should be handled separately from restaurant revenue where they are intended for employees.

A restaurant should have a documented policy for:

• Collection

• Distribution

• Employee allocation

• Accounting treatment

• Payroll implications

The business should not casually mix employee tips with restaurant sales.

Income Tax for Restaurants

GST and income tax are two different tax systems.

GST primarily deals with the tax on supplies.

Income tax is concerned with the restaurant's taxable business income.

For regular accounting, the basic concept is:

Business Revenue − Allowable Business Expenses = Business Profit

The resulting taxable income is then determined under the applicable income-tax provisions.

The tax treatment depends on the legal structure of the restaurant.

For example:

• Proprietorship

• Partnership firm

• LLP

• Private Limited Company

• Other eligible structures

The applicable tax rate and return form can therefore differ.

Presumptive Taxation Under Section 44AD

Eligible small restaurant businesses operated by a resident individual, HUF or resident partnership firm other than an LLP may potentially use the presumptive taxation scheme under Section 44AD, subject to the statutory conditions.

The Income Tax Department currently states that the Section 44AD turnover threshold is:

• ₹2 crore, or

• ₹3 crore where cash receipts do not exceed 5% of total gross receipts, subject to the applicable conditions.

Under Section 44AD, presumptive business income is generally calculated at:

• 6% for qualifying receipts received through specified banking/electronic modes

• 8% for other qualifying receipts

subject to the applicable provisions.

However, presumptive taxation is not automatically suitable for every restaurant.

A restaurant owner should compare:

Regular books and actual profit

against

Presumptive taxation

before choosing the appropriate method.

Tax Audit for Restaurant Businesses

Tax audit requirements depend on the applicable law and turnover/cash-transaction conditions.

The Income Tax Department states that the business tax-audit threshold is generally ₹1 crore, but it can increase to ₹10 crore where cash receipts and cash payments do not exceed 5% of total receipts and total payments, subject to the applicable conditions.

This is particularly relevant to restaurants because restaurants often receive a significant proportion of their sales through cash.

Therefore, restaurants should maintain accurate records of:

• Cash sales

• Cash purchases

• Cash expenses

• Bank receipts

• Digital payments

A restaurant should not assume that the tax-audit threshold is simply based on total turnover.

TDS for Restaurants

Restaurants can also have Tax Deducted at Source (TDS) obligations depending on the nature of payments they make.

Potential areas include:

• Employee salaries

• Rent

• Contractor payments

• Professional fees

• Certain other payments covered by the Income Tax Act

The applicable section, threshold, rate and timing depend on the nature of the payment and the recipient.

Therefore, restaurants should maintain a TDS payable ledger and review applicable TDS requirements before making significant payments.

E-Invoicing for Large Restaurants

Restaurants that cross the applicable e-invoicing threshold may need to comply with the e-invoicing system for covered transactions.

The current e-invoicing framework has been extended to taxpayers with aggregate turnover exceeding ₹5 crore, subject to the applicable rules and conditions.

However, an important point for restaurants is that B2C restaurant bills are not automatically the same thing as B2B e-invoices.

Restaurants should determine:

• Whether e-invoicing applies to the entity

• Which transactions are covered

• Whether the customer is B2B

• Whether the transaction is within the notified scope

The accounting/POS software should be configured accordingly.

Financial Statements for a Restaurant

A properly maintained restaurant accounting system should ultimately produce financial statements such as:

Profit & Loss Account

Shows:

• Revenue

• Food cost

• Employee cost

• Rent

• Utilities

• Delivery commissions

• Marketing

• Depreciation

• Other expenses

• Profit

Balance Sheet

May include:

• Cash

• Bank balances

• Inventory

• Receivables

• Equipment

• Furniture

• Payables

• Loans

• Capital

Cash Flow

Shows where cash is:

• Generated

• Spent

• Invested

• Borrowed

A restaurant can be profitable on paper but still experience cash-flow problems, which is why cash-flow reporting is important.

Key Restaurant Accounting Ratios

Restaurant owners should monitor more than just monthly sales.

Important metrics include:

1. Food Cost %

Food Cost ÷ Food Sales × 100

2. Labour Cost %

Employee Cost ÷ Sales × 100

3. Prime Cost

A commonly used management metric:

Food & Beverage Cost + Labour Cost

4. Rent-to-Sales Ratio

Rent ÷ Sales × 100

5. Delivery Commission %

Platform Charges ÷ Online Sales × 100

6. Gross Margin

Gross Profit ÷ Sales × 100

7. Net Profit Margin

Net Profit ÷ Revenue × 100

Tracking these ratios helps restaurant owners identify problems before they become serious.

Restaurant Accounting Software

A restaurant's accounting system should ideally integrate with its POS system.

A useful workflow is:

Customer Order

↓

POS Billing

↓

Payment Collection

↓

Daily Sales Report

↓

Accounting Software

↓

GST & Tax Records

↓

Financial Statements

The accounting system should ideally integrate or reconcile:

• POS sales

• Inventory

• Purchases

• Payment gateways

• Bank accounts

• Online delivery platforms

• Expenses

• Payroll

• GST data

Automation reduces manual data-entry errors.

Daily Restaurant Accounting Checklist

A restaurant owner can use the following daily checklist:

Sales

• Verify POS sales

• Reconcile cash

• Reconcile card payments

• Reconcile UPI

• Reconcile online orders

• Check discounts

• Check refunds

• Check complimentary bills

Inventory

• Record purchases

• Record wastage

• Check high-value items

• Review stock discrepancies

Expenses

• Record cash expenses

• Record supplier purchases

• Record delivery-platform charges

• Record utility expenses

Tax

• Verify GST classification

• Track GST liability

• Check invoices

• Track TDS where applicable

Monthly Restaurant Accounting Checklist

At the end of every month, management should review:

• Total sales

• Food cost

• Labour cost

• Rent

• Utilities

• Delivery commissions

• Marketing expenses

• Gross profit

• Net profit

• Inventory

• Supplier balances

• Customer receivables

• Cash balance

• Bank balance

• GST payable

• TDS payable

• Loans and EMIs

• Outstanding expenses

A monthly management report can reveal problems much earlier than an annual financial statement.

Common Accounting Mistakes in Restaurants

1. Recording Only Bank Settlements

A restaurant may receive net settlements from delivery platforms after deductions.

Recording only the settlement amount can distort sales and expense reporting.

2. Mixing Alcohol and Food Sales

Alcohol is outside GST while food may be subject to GST.

These should be separately tracked.

3. Claiming Ineligible ITC

Restaurants charging the applicable 5% rate without ITC should not claim input tax credit on those restaurant-service inputs merely because GST was paid on purchases.

4. Ignoring Wastage

Unrecorded wastage makes inventory reconciliation difficult and can hide operational problems.

5. Not Reconciling POS With Bank

The POS report, bank statement and accounting books should agree after considering timing differences and settlements.

6. Treating Delivery Settlements as Sales

The accounting system should separately identify gross sales and platform charges.

7. Ignoring Cash Transactions

Restaurants with significant cash sales need strong daily cash controls.

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8. Recording Personal Expenses as Business Expenses

Owners should maintain a clear distinction between:

Business expenses

and

Personal expenses/drawings

9. Delaying Bookkeeping

Waiting until the end of the year makes it difficult to identify:

• Missing invoices

• Stock losses

• Cash differences

• Unpaid taxes

• Incorrect classifications

How to Set Up a Proper Restaurant Accounting System

A practical implementation can follow these steps.

Step 1: Configure the POS

Create separate categories for:

• Food

• Beverages

• Alcohol

• Takeaway

• Delivery

• Discounts

• Complimentary sales

Step 2: Create a Chart of Accounts

Create appropriate accounts for:

• Sales

• Purchases

• Inventory

• Salaries

• Rent

• Utilities

• Marketing

• Delivery commissions

• Repairs

• Professional fees

• GST

• TDS

• Loans

Step 3: Integrate Payment Methods

Track:

• Cash

• Card

• UPI

• Payment gateways

• Delivery platforms

Step 4: Implement Inventory Controls

Record:

Opening Stock + Purchases − Closing Stock = Consumption

Step 5: Reconcile Daily

Compare POS, cash and digital payments.

Step 6: Close Accounts Monthly

Prepare monthly:

• P&L

• Balance sheet

• Cash flow

• GST reconciliation

• Inventory report

• Expense report

Step 7: Review Tax Compliance

Check:

• GST returns

• TDS

• Income tax

• Tax audit applicability

• E-invoicing

• Other applicable registrations/compliances

Restaurant Accounting Example

Consider a restaurant with the following monthly figures:

Particular	Amount
Food sales	₹8,00,000
Beverage sales	₹2,00,000
Online sales	₹3,00,000
Total sales	₹13,00,000
Food & beverage cost	₹4,50,000
Salaries	₹2,50,000
Rent	₹1,20,000
Utilities	₹50,000
Delivery/platform charges	₹60,000
Marketing	₹30,000
Other expenses	₹40,000

The accounting system can then calculate operating profitability and key ratios.

But the restaurant should not stop at calculating profit.

Management should also ask:

• Is food cost increasing?

• Are online commissions too high?

• Is wastage increasing?

• Are cash sales being deposited correctly?

• Are inventory records accurate?

• Are GST records matching sales?

• Are expenses properly supported?

• Is there enough cash to meet upcoming liabilities?

This is where professional accounting becomes valuable.

How Technology Can Improve Restaurant Accounting

Modern restaurants can automate significant parts of accounting.

Useful technologies include:

• Cloud accounting

• POS integration

• Inventory management

• Digital payment reconciliation

• Automated GST reports

• Bank feeds

• Payroll software

• Expense management

• Delivery-platform reconciliation

• Dashboard reporting

A connected system can reduce repetitive manual work.

For example:

POS → Accounting → Inventory → Bank → GST → Management Dashboard

can provide management with a much clearer view of the business.

Final Restaurant GST & Tax Checklist

Before closing a financial year, restaurant owners should review:

GST

• GST registration status

• Correct GST rate

• ITC eligibility

• Composition scheme status, if applicable

• GSTR-1 reconciliation

• GSTR-3B reconciliation

• Online delivery sales

• Credit/debit notes

• Hotel/specified-premises treatment, where applicable

Income Tax

• Total turnover

• Business expenses

• Cash transactions

• Presumptive-tax eligibility

• Tax-audit applicability

• Advance tax

• TDS compliance

• Financial statements

Accounting

• Cash reconciliation

• Bank reconciliation

• POS reconciliation

• Inventory reconciliation

• Supplier reconciliation

• Delivery-platform reconciliation

• Wastage report

• Monthly profit analysis

Frequently Asked Questions

Is GST applicable to restaurant food?

Yes, restaurant services can be subject to GST. The applicable rate depends on the nature and location of the restaurant and the relevant GST classification. The current CBIC rate schedule provides 5% without ITC for restaurant service other than at specified premises and a separate 18% entry for restaurant service at specified premises.

Can a restaurant claim GST input tax credit?

It depends on the applicable GST rate and conditions. Restaurant service taxed at the concessional 5% rate is subject to a no-ITC condition.

Is alcohol subject to GST?

Alcoholic liquor for human consumption is outside GST. State-level taxes and regulatory requirements apply instead.

Does a restaurant pay GST on food delivered through an app?

Restaurant services supplied through e-commerce operators are covered by the Section 9(5) mechanism under which the e-commerce operator pays the GST on the notified restaurant service. The restaurant's aggregate turnover still includes its restaurant supplies made through the platform.

Can a small restaurant use the composition scheme?

Eligible restaurant businesses can potentially opt for the composition scheme subject to the applicable turnover and other conditions. The GST Council's published guidance states a 5% composition rate for restaurant services and a ₹1.5 crore turnover limit, subject to the scheme's conditions.

Is food wastage an accounting issue?

Yes. Wastage directly affects food cost and inventory. Restaurants should maintain appropriate records of spoilage, preparation losses, expired items and other wastage.

What is the biggest accounting problem in restaurants?

There is no single problem for every restaurant, but common issues include poor POS reconciliation, inventory leakage, unrecorded wastage, incorrect GST treatment, delivery-platform reconciliation problems and weak cash controls.

Should restaurants maintain daily accounts?

Yes. Daily sales and payment reconciliation is strongly recommended because restaurants process a large number of transactions.

Restaurant accounting is much more than recording daily sales.

A professionally managed restaurant should have a system that connects:

Sales → POS → Payments → Inventory → Expenses → GST → Income Tax → Financial Reporting

The most important areas to control are:

• Daily sales reconciliation

• Cash and digital-payment reconciliation

• Food inventory

• Wastage

• Food cost

• Delivery-platform commissions

• GST classification

• ITC eligibility

• Alcohol accounting

• Income-tax records

• TDS

• Tax-audit requirements

• Monthly profitability

For restaurant owners, accurate accounting provides more than tax compliance. It helps answer the questions that matter most to the business:

How much are we selling?

Where is the money going?

What is our actual profit?

Which costs are increasing?

Are we losing money through wastage or discounts?

Is our GST and tax compliance accurate?

A restaurant with reliable financial data can make better decisions about pricing, staffing, menu design, inventory, expansion and profitability.