Restaurant Supply: Schedule II 6(b) and Why Food Is a Service

Restaurant Supply explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A restaurant hands over a plate of food for money. Goods change hands. Property passes. On first principles this is a supply of goods.

It is not, and the reason is a declaration, not an analysis.

Schedule II paragraph 6(b) declares as a composite supply of services the "supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration." The classification is settled by the entry. What is not settled by it is whether a particular arrangement is restaurant service, outdoor catering, or a plain supply of goods — and those carry different rates and different ITC consequences.

What paragraph 6(b) does and does not do

It does put the composite supply question beyond argument for food served for consideration. No bundling analysis is needed, and no principal supply has to be identified.

It does not decide which service entry applies. The rate notification distinguishes restaurant service, outdoor catering, canteen and mess services, accommodation with food, and supply through an e-commerce operator — and the classification between them is where the money is.

It expressly excludes alcoholic liquor for human consumption. Alcohol is outside GST under Article 366(12A) of the Constitution and remains subject to State excise and VAT. A restaurant serving both runs two tax regimes on one bill.

Restaurant service and the ITC bargain

Restaurant service is defined in the rate notification as supply, by way of or as part of any service, of goods being food or any other article for human consumption or drink, provided by a restaurant, eating joint (including mess and canteen), whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

Note the last clause: takeaway and home delivery from a restaurant are still restaurant service. The classification does not change because the customer walks out with the food.

Restaurant service other than at specified premises is taxed at 5% without input tax credit. That is a bargain, not a concession — the low rate is conditioned on forgoing credit on rent, equipment, ingredients, utilities and everything else.

For a restaurant with heavy fit-out capex or high rent, the arithmetic can be unattractive, and there is no election to pay a higher rate and keep the credit.

The variants that need their own answer

Cloud kitchens. No dining area, delivery only. Still restaurant service on the definition — the exclusion of premises consumption is express. The complication is that supply is usually through an e-commerce operator, which shifts liability under s.9(5) to the operator. The kitchen's own registration and reporting obligations change accordingly. E-commerce operators under section 9(5) →

Outdoor catering. Supply of food at a place other than the supplier's premises, typically under a contract for an event. Different entry, different rate, and ITC treatment that differs from restaurant service. The distinguishing feature is that the supplier goes to the customer's location under an event-specific arrangement.

Industrial canteen run by a contractor. The contractor supplies canteen service to the employer. The employer's onward provision to employees, and any recovery from them, is a separate question governed by the employment analysis. Employee recoveries →

Hotel with food included in the tariff. Where food is bundled into the room tariff, accommodation is the principal supply and the composite supply takes the accommodation rate. Where the hotel restaurant bills separately, it is restaurant service — and the rate for restaurant service within specified premises differs from that outside them.

Sale of packaged food from a counter. A sealed, branded packaged item sold as-is, with no service element, is a supply of goods at the rate for that item — not restaurant service. A sweet shop with a seating area sells both, and needs to distinguish them at the point of sale.

Mid-day meal and institutional supply. Frequently exempt under the services exemption notification; check the specific entry and its conditions.

The alcohol split

Because alcoholic liquor is outside GST:

• the food and non-alcoholic beverage portion is a supply of services under paragraph 6(b), taxed under GST;
• the liquor portion is outside GST and bears State excise and VAT;
• the establishment must apportion shared costs, and reverse ITC attributable to the liquor turnover, which is an exempt or non-GST supply for s.17(2) and Rule 42 purposes;
• service charge levied on a composite bill has to be attributed between the two.

This is one of the most commonly under-provided reversals in the hospitality sector.

Key takeaways

• Schedule II paragraph 6(b) declares food supplied for consideration to be a composite supply of services.
• Alcoholic liquor for human consumption is expressly excluded and stays outside GST.
• Takeaway and delivery from a restaurant remain restaurant service — the definition covers consumption away from the premises.
• Restaurant service outside specified premises is 5% without ITC, and the bargain is not optional.
• Cloud kitchens supplying through an ECO engage s.9(5), shifting liability to the operator.
• Liquor turnover requires Rule 42 apportionment of common credit.

Read next

• GST for Restaurants and Food Businesses
• Schedule II: Activities Treated as Goods or Services
• GST on Food and Beverages: Restaurant vs Packaged
• ITC Reversal Under Rules 42 and 43

Disclaimer: Positions stated as on 5 September 2026, based on ICAI Background Material on GST, Volume I (2026 edition). Verify the current rate entry and the definition of specified premises before applying a rate.