GST for Restaurants & Food Businesses in Indore — Complete CA Compliance

MP's commercial capital and the cleanest city in India — Indore has India's largest soyabean processing industry, a major pharma cluster in Pithampur, and a fast-growing IT corridor. For restaurant owners, dhaba operators, cloud kitchen founders, café and bakery businesses, and catering companies in Indore, Madhya Pradesh — GST compliance has specific rules that differ significantly from other industries. The no-ITC rule at 5%, the Swiggy/Zomato aggregator mechanism since 2022, the Composition Scheme eligibility, and the specific GSTR-1 reporting requirements for food delivery orders all create a compliance landscape that catches many Indore food businesses off-guard. TaxAMC's CA team manages complete GST compliance for restaurants and food businesses across Indore — ensuring zero penalties, correct returns, and no surprise notices.

1. GST Rates for Different Restaurant Types in Indore

Restaurant Type	GST Rate	ITC Allowed?	Notes
Standalone restaurant (AC or non-AC)	5%	❌ No ITC on inputs or capital goods	Most common — applies to standalone dine-in restaurants regardless of AC status
Restaurant in hotel — room tariff ≤₹7,500/night	5%	❌ No ITC	Follows standalone restaurant rate
Restaurant in hotel — room tariff >₹7,500/night	18%	✅ Full ITC allowed	5-star and luxury hotel restaurants — higher rate, full credit chain
Outdoor catering / banquet hall	18%	❌ No ITC	Food supply for weddings, events, corporate catering outside restaurant premises
Composition Scheme restaurant	5% (flat on turnover)	❌ No ITC	Eligible for turnover up to ₹1.5 crore. Simplified compliance.
Ice cream parlour / pan masala shop	18%	✅ ITC allowed	Specifically excluded from restaurant 5% rate by notification
Bakery with seating (restaurant activity)	5% on eat-in; product rate on packaged goods sold separately	❌ No ITC for restaurant portion	Bakeries must separate restaurant supply from retail packaged goods supply
Cloud kitchen	5%	❌ No ITC	Delivery-only kitchen — same 5% rate as dine-in restaurants
Sweet shop (mithai shop) without seating	GST at product rate (varies 5–18%)	✅ ITC allowed on inputs	Not a restaurant — product-level GST applies

2. Why Most Restaurants in Indore Cannot Claim ITC — Full Explanation

This is the most misunderstood aspect of restaurant GST — and the most common source of demand notices for Indore restaurants. Let's be crystal clear:

At the 5% GST rate, restaurants CANNOT claim ITC on:

• Raw ingredients, cooking oil, spices, flour, vegetables — all food inputs
• Packaging materials — takeaway boxes, containers, bags
• Kitchen equipment — stoves, refrigerators, ovens, fryers, mixers
• Furniture and fixtures — tables, chairs, air conditioning units
• Renovation and interior work — civil construction is always blocked
• Electricity bills — even with GST invoice from electricity supplier
• Pest control and cleaning services
• Maintenance and repair services
• Management and accounting software

Why the ITC restriction exists:
In November 2017, restaurant GST was reduced from 12% (with ITC) to 5% (without ITC) — a benefit to restaurants that was supposed to lower menu prices. The government felt that at 5%, the tax burden was already low enough that ITC credit was unnecessary. Restaurants that continued claiming ITC after the November 2017 change received demand notices with 18% interest and 100% penalty.

3. Swiggy and Zomato GST — Aggregator Rules Since January 2022 in Indore

From 1st January 2022, the GST law was amended to make food delivery aggregators (Swiggy, Zomato) the "deemed supplier" for all restaurant orders placed through their platforms. This fundamentally changed GST compliance for all Indore restaurants on these platforms.

What changed in January 2022:

Aspect	Before January 2022	After January 2022
Who collects GST from customer?	Restaurant collects 5% GST	Swiggy/Zomato collects and deposits GST
Who deposits GST to government?	Restaurant deposits to GST portal	Swiggy/Zomato deposits directly
Restaurant's GSTR-1 reporting	Include aggregator orders in normal sales	Report separately in Table 8 as "Supplies through ECO"
Restaurant's GSTR-3B	Pay 5% on all sales including aggregator	Do NOT pay GST on aggregator orders — only on direct sales

What this means for your Indore restaurant in practice:

• Your Swiggy/Zomato dashboard shows your total order value — this includes customer GST that Swiggy/Zomato is depositing on your behalf
• In your GSTR-1, all Swiggy/Zomato orders must be reported in the special "Supplies through E-Commerce Operator" table (Table 8) — NOT in the regular B2C sales table
• In your GSTR-3B, you only pay 5% GST on direct dine-in orders, takeaway orders, and phone orders — NOT on Swiggy/Zomato orders
• Swiggy/Zomato will provide you a monthly statement of orders through their platform — TaxAMC reconciles this against your GSTR-1 entries every month

4. GST Composition Scheme — Should Your Indore Restaurant Use It?

Restaurants with annual turnover up to ₹1.5 crore can opt for the GST Composition Scheme — paying 5% GST on all turnover with minimal filing requirements. Whether this is right for your Indore restaurant depends on your business profile.

Feature	Regular GST (5%)	Composition Scheme (5%)
GST rate on food supply	5%	5% (same rate)
Monthly return filing	GSTR-1 (monthly) + GSTR-3B (monthly)	Monthly challan only (PMT-06)
Annual return	GSTR-9 (if applicable)	GSTR-4 — once per year in April
GST invoice to B2B buyers	✅ Full tax invoice — buyers can see it	❌ Only Bill of Supply — buyers cannot claim ITC
Interstate supply	✅ Allowed	❌ Not allowed — only intrastate sales
Turnover limit	No upper limit	₹1.5 crore per year
Compliance effort	Monthly — moderate	Minimal — quarterly summary
ITC on inputs	❌ Blocked at 5%	❌ Blocked at 5%

TaxAMC's recommendation for Indore restaurants:

• Composition Scheme is ideal for: Standalone dine-in restaurants with all local customers, no corporate B2B billing, no inter-state catering, turnover below ₹1.5 crore — drastically reduces compliance burden
• Regular GST is better for: Restaurants with any B2B corporate catering clients (who need tax invoices for ITC), cloud kitchens on Swiggy/Zomato at large scale, catering businesses operating across cities, or approaching the ₹1.5 crore threshold

5. Documents Required for Restaurant GST Registration in Indore

6. Monthly GST Returns for Restaurants in Indore

For regular GST filers (non-Composition), monthly filing requirements:

Return	What to Report	Due Date	Restaurant-Specific Notes
GSTR-1	All outward supplies — dine-in, takeaway, phone orders, catering orders, aggregator orders	11th of following month	Swiggy/Zomato orders in Table 8 (ECO). Direct sales in B2C table. Corporate catering in B2B table with buyer GSTIN.
GSTR-3B	Summary — total sales, GST payable, ITC (nil for most restaurants), net payment	20th of following month	Do NOT include Swiggy/Zomato orders in tax payable. Only pay 5% on direct sales. ITC must be nil (not claimed).

For Composition Scheme restaurants: monthly PMT-06 challan + annual GSTR-4 return in April.

7. Seven Common GST Errors That Get Indore Restaurants Notices

1. Claiming ITC on kitchen equipment, ingredients, or electricity — the most expensive mistake. 18% interest + demand notice.
2. Including Swiggy/Zomato orders in GST payable (post January 2022) — overpays tax and creates reconciliation issues.
3. Not reporting Swiggy/Zomato orders in GSTR-1 Table 8 — underreports supply, creates mismatch with aggregator's own filing.
4. Applying 18% GST on outdoor catering but not filing correctly — catering at a separate venue is 18%, but some caterers apply 5% — attracts demand for the difference.
5. Not filing nil GST returns during off-season or closure months — even zero-turnover months require a nil GSTR-1 and GSTR-3B to be filed. ₹20/day penalty accumulates.
6. Composition restaurants issuing GST tax invoices to B2B clients — Composition dealers can only issue Bill of Supply, not tax invoices. Issuing tax invoices invalidates the Composition election.
7. Not separating ice cream parlour / packaged food sales from restaurant food supply — ice cream and packaged goods sold from within a restaurant premises may attract 18% and require separate reporting from 5% dine-in food.

8. Cloud Kitchens — GST Rules and Compliance in Indore

Cloud kitchens (delivery-only kitchens with no dine-in) are a fast-growing food business format in Indore. GST rules for cloud kitchens:

• GST rate: 5% — same as regular restaurants. Cloud kitchens supply food for human consumption and are treated as restaurants under GST.
• ITC: Blocked — same as all restaurants at 5%.
• Swiggy/Zomato sales: Aggregator mechanism applies — Swiggy/Zomato collects and deposits GST, you report in Table 8 of GSTR-1.
• Multiple brands, one kitchen: If you operate multiple virtual restaurant brands from one kitchen (e.g., one kitchen running "Brand A Burgers" and "Brand B Biryani"), all revenue is reported under your single GSTIN — no separate registration per virtual brand required.
• Multiple kitchens in Indore: Each kitchen in Indore operates under your primary Madhya Pradesh GSTIN. If you expand to kitchens in other states, additional state GSTINs are required for each state of operation.
• Packaging materials: Delivery boxes, napkins, cutlery — all subject to ITC blocking. Cannot claim ITC on these.

9. Areas We Serve in Indore

TaxAMC provides services across all localities in Indore, including:

• Pithampur Industrial Zone
• Vijay Nagar (Commercial)
• AB Road
• Scheme 54 and 78
• LIG Square
• Palasia
• Super Corridor (IT)

Also serving nearby cities: Bhopal, Ujjain, Dewas, Dhar.

10. Frequently Asked Questions — Restaurant GST in Indore

Q: What GST rate does my restaurant in Indore charge?
5% for most standalone restaurants — AC and non-AC. 18% for restaurants in hotels with tariff above ₹7,500/night and for outdoor catering. TaxAMC confirms your applicable rate.

Q: Can I claim GST ITC on my kitchen equipment purchase?
No — at the 5% restaurant rate, ITC on all inputs and capital goods is fully blocked. Claiming it creates a demand notice with 18% interest.

Q: Do I pay GST on Swiggy and Zomato orders in Indore?
No — since January 2022, Swiggy and Zomato collect and deposit GST on your orders. You report them in GSTR-1 but do not pay GST on them in GSTR-3B.

Q: My restaurant turnover is ₹60 lakh — should I use the Composition Scheme?
Possibly yes — if all your sales are local and B2C. TaxAMC evaluates your specific situation and recommends the scheme that minimises your compliance burden without hurting your business relationships.

Q: What happens if I don't file GST returns for my restaurant in Indore?
₹20/day penalty per return. After 6 months of non-filing, GSTIN suspension — you cannot issue tax invoices and Swiggy/Zomato may suspend your account. TaxAMC prevents all non-filing penalties with managed monthly compliance.