Composition Scheme Tax Rate for a Restaurant
GSTZone Desk · Updated 2026
Short answer
A restaurant opting for the GST composition scheme pays a flat 5% of turnover (2.5% CGST + 2.5% SGST) — a distinct rate from the 1% that applies to traders and manufacturers under the same scheme.
In detail
Composition isn’t a single flat rate across every business type — it varies by the category of supply, and restaurants sit in their own bracket, separate from traders and manufacturers. This reflects that food service has a different cost and margin structure than pure trading.
As with every composition category, this 5% comes without any input tax credit — the restaurant can’t claim credit on its raw material, rent, or equipment purchases, in exchange for the simplicity of a flat rate on turnover and lighter quarterly compliance.
It’s worth noting this 5% composition rate for restaurants ends up numerically identical to the standard 5% rate that a regular (non-composition) standalone restaurant charges under normal GST — the real practical difference between the two isn’t the tax rate itself, but the compliance burden: composition means simpler quarterly filing and no detailed invoice-level GST reporting.
GSTZone tip
Since the tax rate is the same whether you’re in composition or regular scheme as a standalone restaurant, the decision really comes down to how much you value the lighter compliance of composition versus the ability to issue a proper tax invoice and expand more freely — see the next question in this series for that trade-off.
Related questions
Does the ₹1.5 crore turnover limit apply to restaurants too?+
Yes — restaurants fall under the main Section 10 composition scheme with the same ₹1.5 crore (₹75 lakh in specified states) turnover ceiling as traders and manufacturers.
Can a bar serving alcohol opt for restaurant composition?+
A restaurant that also serves alcohol for human consumption is specifically excluded from composition eligibility, since alcohol itself sits outside GST altogether and complicates the scheme’s conditions.
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