GST for Cafe Business 2026 – Rates, Registration, ITC & Complete Compliance Guide
Complete GST guide for cafes, coffee shops, tea stalls, bakeries, and casual dining outlets in India. GST 2.0 rates on cafe food and beverage supply, composition scheme, ITC rules, Zomato/Swiggy Section 9(5) compliance, and registration thresholds.
Quick Summary – GST for Cafe Business
- GST Rate on Cafe Services (2026): 5% (without ITC) on all food and beverage supply from standalone cafes, coffee shops, tea stalls, and bakeries.
- GST on Zomato / Swiggy Orders: The e-commerce operator collects and pays 5% GST under Section 9(5). The cafe does not separately pay GST on platform orders.
- Composition Scheme: Available for cafes with turnover up to ₹1.5 crore. Pay a flat 5% GST on turnover with no ITC.
- Registration Threshold: ₹20 lakh in normal states; ₹10 lakh in special category states. Mandatory for aggregator onboarding and inter-state operations.
- ITC: Not available at 5% GST. Available only for specified premises at 18% GST (rare for cafes).
- Return Filing: GSTR-1 and GSTR-3B monthly (regular scheme); CMP-08 quarterly and GSTR-4 annually (composition scheme).
Takeaway: Standalone cafes charge 5% GST without ITC. Choose between regular scheme (flexible, allows aggregators) and composition scheme (simpler, no ITC, no aggregators) based on your business model.
1. Introduction – GST for Cafe Business in India
The cafe industry in India has undergone a remarkable transformation over the past decade. From traditional tea stalls and small coffee houses to premium specialty cafes, co-working cafes, and bakery-cafes, this sector has become one of the fastest-growing segments of the food service industry. For cafe owners, understanding Goods and Services Tax (GST) compliance is essential for pricing, profitability, and long-term growth.
Under the GST framework, cafe services are classified as restaurant service under SAC Code 9963, the same category covering dine-in restaurants, cloud kitchens, and food service establishments. Cafes charge 5% GST without Input Tax Credit (ITC) on their food and beverage supply, regardless of whether the cafe is air-conditioned or not.
With the rollout of GST 2.0 effective 22 September 2025, the government simplified the rate structure for food services by removing the AC/non-AC distinction. Cafes now charge a uniform 5% GST on all dine-in, takeaway, and delivery orders. However, the treatment of platform orders under Section 9(5) creates unique compliance obligations for cafes using Zomato or Swiggy.
This comprehensive guide covers GST rates on cafe services, registration thresholds, the composition scheme, Input Tax Credit rules, Section 9(5) compliance for Zomato/Swiggy orders, return filing, and common pitfalls for cafe businesses.
Takeaway: Cafes are taxed as restaurant services at 5% GST without ITC. Platform orders are covered under Section 9(5), where the aggregator pays GST. Understanding the compliance landscape is essential for cafe owners.
2. GST 2.0 Rates on Cafe Services (2026)
Under GST 2.0, cafe services have a clear rate structure. The table below summarises the applicable GST rates for various cafe scenarios.
| Cafe Type | GST Rate | ITC Availability |
|---|---|---|
| Standalone Cafe (AC or Non-AC) | 5% | ❌ No ITC |
| Coffee Shop / Tea Stall | 5% | ❌ No ITC |
| Bakery Cafe / Patisserie | 5% | ❌ No ITC |
| Co-Working Cafe | 5% | ❌ No ITC |
| Cafe on Zomato / Swiggy | 5% (collected by platform) | ❌ No ITC |
| Cafe in Hotel (Room Tariff > ₹7,500) – Specified Premises | 18% | ✅ Yes |
| Cafe – Packaged Food / Retail Sales | 5% to 18% | Varies by item |
Key Points on Cafe GST Rates
- Uniform 5% GST: All standalone cafes charge 5% GST on food and beverages, regardless of AC status.
- 18% Only for Specified Premises: Cafes inside hotels with room tariff above ₹7,500 per night charge 18% GST with ITC.
- Packaged Food: Packaged snacks and beverages may attract different rates based on HSN codes.
- Alcohol: Alcoholic beverages are outside the GST regime and taxed under State Excise.
Takeaway: Apply 5% GST on all cafe food and beverage supply. Only specified premises cafes charge 18% GST with ITC.
3. GST Registration for Cafes – Eligibility & Threshold
Under Section 22 of the CGST Act, 2017, registration is mandatory for cafes if the aggregate turnover exceeds the prescribed limit.
| Business Type | Normal States | Special Category States |
|---|---|---|
| Cafes & Coffee Shops (Services) | ₹20 lakh | ₹10 lakh |
| Cafes with Packaged Food (Goods) Sales | ₹40 lakh | ₹20 lakh |
| Cafes Selling through Aggregators | Assess threshold + platform requirements | Assess threshold + platform requirements |
| Multi-Outlet Cafe Chains | Mandatory in each state | Mandatory in each state |
Mandatory Registration Cases for Cafes
Voluntary Registration: Even if turnover is below the threshold, voluntary registration may be beneficial for building business credibility with corporate clients and for aggregator onboarding.
Takeaway: If your turnover exceeds ₹20 lakh, GST registration is mandatory. Aggregators often require GSTIN for onboarding. Voluntary registration may be beneficial for B2B clients.
4. Step‑by‑Step GST Registration Process for Cafes
Takeaway: Keep cafe address proof and FSSAI license ready before starting the application.
5. Documents Required for GST Registration – Cafe Business
- PAN Card of the business / proprietor / partners.
- Aadhaar Card of all promoters / partners.
- Proof of business address (rent agreement, electricity bill, or property tax receipt).
- Bank account details (cancelled cheque or bank statement).
- FSSAI License (mandatory for all food businesses).
- Cafe ownership or rent agreement.
- Photographs of the cafe premises.
- Digital Signature Certificate – mandatory for companies and LLPs.
Takeaway: Maintain updated FSSAI license and cafe address proof for GST registration.
6. Composition Scheme for Cafes – Eligibility & Conditions
The Composition Scheme is a simplified GST option for small cafes. Under this scheme, eligible cafes pay a flat 5% GST on turnover (2.5% CGST + 2.5% SGST) with no ITC benefits.
| Parameter | Details |
|---|---|
| Eligibility | Cafes with turnover up to ₹1.5 crore (₹75 lakh in special category states) |
| GST Rate | 5% on turnover (2.5% CGST + 2.5% SGST) |
| ITC | ❌ Not available on any inputs, input services, or capital goods |
| Invoicing | Bill of Supply (cannot collect GST separately from customers) |
| Returns | CMP-08 (quarterly) + GSTR-4 (annual) |
| Board Display | Must display "Composition Taxable Person, Not Eligible to Collect Tax" |
Restrictions under Composition Scheme
- ❌ Cannot make inter-state supplies – Services must be within the same state.
- ❌ Cannot deal in excluded goods – Ice cream, pan masala, tobacco, etc.
- ❌ Cannot claim ITC – All input GST becomes a permanent cost.
- ❌ Cannot sell through aggregators – Cafes on Zomato/Swiggy cannot opt for composition.
Takeaway: Composition scheme is ideal for small, intra-state cafes that do not use aggregators. It offers lower compliance burden but no ITC benefits.
7. Input Tax Credit (ITC) for Cafes – Rules & Restrictions
Input Tax Credit (ITC) is the mechanism that allows businesses to offset GST paid on purchases against GST collected on sales. For cafes, ITC availability depends on the GST rate charged.
| Cafe Type | GST Rate | ITC Availability |
|---|---|---|
| Standalone Cafe | 5% | ❌ No ITC |
| Cafe in Specified Premises (Hotel Room Tariff > ₹7,500) | 18% | ✅ Yes |
| Composition Scheme Cafe | 5% (on turnover) | ❌ No ITC |
Why ITC is Not Available at 5% GST
The 5% concessional GST rate for cafes is designed as a simplified, low-rate structure. In exchange for the lower rate, the government has blocked ITC on all inputs and input services for cafes at this rate. This means the GST paid on raw materials, packaging, rent, equipment, and professional services becomes a permanent cost for the cafe.
Blocked Credits under Section 17(5)
| Particulars | 5% GST (No ITC) | 18% GST (With ITC) |
|---|---|---|
| Monthly Revenue | ₹10,00,000 | ₹10,00,000 |
| GST Collected | ₹50,000 | ₹1,80,000 |
| GST Paid on Inputs | ₹40,000 | ₹40,000 |
| ITC Claimed | ₹0 | ₹40,000 |
| Net GST Payable | ₹50,000 | ₹1,40,000 |
Although the 5% rate results in lower net GST payable, the cafe absorbs ₹40,000 in input GST as a cost. The 18% rate allows ITC but results in higher net GST payable. The optimal choice depends on the cafe's input cost structure.
Takeaway: Most cafes at 5% GST cannot claim ITC. Only specified premises cafes at 18% GST can claim ITC.
8. Section 9(5) Compliance for Cafes – Zomato & Swiggy Orders
Food delivery through aggregators like Zomato and Swiggy has become a significant revenue channel for cafes. Under GST, these platforms have specific compliance responsibilities under Section 9(5) of the CGST Act.
How GST Works on Zomato / Swiggy Orders
- Platform Collects GST: The e-commerce operator collects and pays 5% GST on the food order on behalf of the cafe.
- Cafe Reporting: The cafe must still report these platform sales in its GSTR-3B return as exempt supplies.
- Delivery Fee: The delivery fee charged by the platform attracts 18% GST.
- Cafe's GST Liability: Since the platform pays GST under Section 9(5), the cafe does not separately pay GST on platform orders.
Cafe's Compliance Obligations
Takeaway: Platforms collect and pay GST on food orders under Section 9(5). Cafes must still register and report platform sales. Composition scheme is not available if using platforms.
9. GST Returns Filing for Cafes
Cafes must file GST returns based on their chosen scheme – regular or composition.
| Return | Description | Due Date |
|---|---|---|
| GSTR-1 | Outward supplies (sales) – regular scheme | 11th of following month |
| GSTR-3B | Summary return with ITC and payment – regular scheme | 20th of following month |
| CMP-08 | Quarterly statement for composition scheme | 18th of month after quarter |
| GSTR-4 | Annual return for composition scheme | 30 June |
| GSTR-9 | Annual return – regular scheme | 31 December |
Key Reporting Requirements
Takeaway: File returns on time to avoid late fees of ₹50 per day and interest on unpaid tax. Report platform sales correctly.
10. Common GST Mistakes by Cafes & Solutions
✅ Solution: Standalone cafes charge 5% GST. Apply the correct rate.
✅ Solution: ITC is not available at 5% GST. Do not claim ITC on inputs.
✅ Solution: Report all platform sales separately in GSTR-1 and GSTR-3B as exempt supplies.
✅ Solution: Composition is not allowed if using e-commerce platforms. Switch to regular scheme.
✅ Solution: Keep proper records and reconcile with platform reports monthly.
✅ Solution: File GSTR-9 by 31 December and GSTR-4 by 30 June.
Takeaway: Correct rate application, proper reporting of platform sales, and timely filing are the keys to error-free compliance.
11. Penalties & Risks for Non‑Compliant Cafes
Takeaway: Apply correct GST rates and report all sales accurately to avoid penalties.
12. Industry‑Specific GST Insights for Cafes
5% GST on all coffee and food. No ITC. Register if turnover exceeds ₹20 lakh or for aggregator onboarding.
5% GST on cafe items. Packaged bakery products may attract different rates. Maintain HSN-wise records.
Cafe services at 5% GST. Co-working charges separate (18% GST). Separate billing recommended.
Franchisee pays royalty to franchisor (18% GST). Franchisee charges 5% GST on cafe services.
Separate GST registration in each state. Centralized accounting for all outlets. ITC on common expenses may be allocated.
5% GST on all orders. Section 9(5) compliance for Zomato/Swiggy. Cannot opt for composition if using platforms.
Takeaway: Tailor your GST compliance based on your cafe type – specialty, bakery, co-working, franchise, or cloud kitchen.
13. Comparison: Regular vs Composition Scheme for Cafes
| Parameter | Regular Scheme (5% GST) | Composition Scheme |
|---|---|---|
| Turnover Limit | No limit | Up to ₹1.5 crore |
| GST Rate | 5% on food | 5% on turnover |
| ITC Availability | ❌ No | ❌ No |
| Inter-State Sales | ✅ Allowed | ❌ Not allowed |
| Aggregator Sales | ✅ Allowed | ❌ Not allowed |
| Returns | Monthly (GSTR-1, GSTR-3B) | Quarterly (CMP-08) + Annual (GSTR-4) |
| Invoice | Tax Invoice with 5% GST | Bill of Supply (no GST collected) |
Takeaway: Regular scheme offers flexibility for aggregator sales and inter-state operations; composition suits small, intra-state cafes with direct orders only.