How GST Applies to POS Billing for Restaurants and Hotels (18% Explained)

What is GST on POS bills?

In India, most restaurant and hotel POS invoices apply 18% GST on services and applicable items. The Goods and Services Tax (GST) replaced multiple indirect taxes and standardized billing across hospitality businesses.

Correct GST configuration in your POS system ensures compliance, avoids penalties, and streamlines accounting. Whether you run a café in Mumbai or a resort in Kerala, understanding GST on POS bills is crucial for smooth operations.

Understanding GST rates for hospitality

18% GST applies to:

• Restaurant services: Dine-in, takeaway, delivery (AC establishments)
• Hotel room tariff: Above ₹2,500 per night
• Banquet services: Event hosting, catering
• Bar services: Alcoholic beverages (state taxes may apply separately)

5% GST applies to:

• Hotel rooms: ₹1,000-₹2,500 per night
• Non-AC restaurant services

0% GST (exempt):

• Hotel rooms: Below ₹1,000 per night
• Room service without AC

GST setup in POS systems

Modern POS systems like urbanPOS Restaurant Management handle GST configuration automatically, but understanding the setup helps ensure accuracy.

Tax configuration essentials:

• Tax masters: CGST/SGST (9% each for intra-state) or IGST (18% for inter-state)
• Item coding: HSN codes for goods, SAC codes for services
• Invoice elements: GSTIN, place of supply, tax breakdown
• Exemption handling: Items below GST threshold

POS invoice must include:

• Business GSTIN number
• Customer GSTIN (for B2B transactions)
• Taxable value, CGST/SGST/IGST amounts
• HSN/SAC codes for each item
• Place of supply

Restaurant GST scenarios with detailed examples

Dine-in vs takeaway billing

Both dine-in and takeaway attract 18% GST for AC restaurants. However, the invoice format and customer experience differ:

Service charge handling - Critical compliance

Important: Service charge treatment has changed post-GST. Here's what you need to know:

• Automatic service charge: If displayed on menu/board, it's part of taxable value
• Optional service charge: Customer can refuse; still taxable if accepted
• Tips: Given voluntarily by customer; not subject to GST

Complex combo meal scenarios

Combo meals require careful GST calculation when items have different rates:

Advanced discount scenarios

Different types of discounts require different GST calculations:

1. Item-level discounts

Apply discount to item price, then calculate GST:

• Original price: ₹500
• Discount (20%): ₹100
• Discounted price: ₹400
• GST (18%): ₹72
• Final: ₹472

2. Bill-level discounts

Calculate GST on individual items, then apply discount to total:

• Item A: ₹300 + ₹54 GST = ₹354
• Item B: ₹200 + ₹36 GST = ₹236
• Subtotal: ₹590
• Discount (10%): ₹59
• Final: ₹531

3. Happy hour pricing

Time-based discounts should be configured in your POS:

• Regular beer price: ₹300 + ₹54 GST = ₹354
• Happy hour (50% off): ₹150 + ₹27 GST = ₹177
• POS should automatically apply based on time

Hotel GST scenarios with complex calculations

Dynamic room tariff GST brackets

Hotels must apply different GST rates based on room tariff. Your urbanPOS Hotel PMS should automatically determine rates:

Multi-night stay complications

GST calculation becomes complex with variable room rates across multiple nights:

Comprehensive F&B posting scenarios

Room service and F&B charges have different GST treatment than room charges:

Corporate vs leisure booking differences

GST treatment varies for B2B vs B2C transactions:

Corporate Booking (B2B):

• Must collect company GSTIN
• Issue tax invoice with HSN/SAC codes
• Customer can claim input tax credit
• Monthly GSTR-1 reporting required

Leisure Booking (B2C):

• Simplified tax invoice
• No GSTIN collection needed
• State-wise place of supply

Advanced banquet billing scenarios

Event bookings involve multiple service components:

Advance payment and GST

Handle advance payments correctly for tax compliance:

• Advance receipt: Issue receipt, not tax invoice
• GST liability: Arises on advance payment
• Final billing: Adjust advance against final invoice
• Cancellation: Reverse GST on refunded advances

Reconciliation and accounting

Daily Z reports should show:

• Gross sales: Total including GST
• Taxable value: Sales amount before GST
• CGST collected: 9% for local sales
• SGST collected: 9% for local sales
• IGST collected: 18% for interstate sales
• Exempted sales: Non-taxable items

POS to Tally integration

Export daily sales data with GST breakup to accounting software:

• Sales account: Taxable value
• CGST payable: 9% collected
• SGST payable: 9% collected
• IGST payable: 18% collected

Critical GST compliance requirements

Mandatory invoice elements for compliance

Every GST invoice must include these elements to avoid penalties:

HSN/SAC codes for hospitality

Use correct classification codes for tax compliance:

Record keeping and documentation

Maintain these records for GST audit compliance:

Daily Records:

• All tax invoices issued
• Credit/debit notes
• Cash register tapes/Z reports
• Receipt books and payment vouchers
• Cancellation vouchers

Monthly Records:

• Purchase invoices with input tax
• Bank statements and reconciliation
• Import/export documents (if applicable)
• Input tax credit reconciliation
• Advance payment details

Annual Requirements:

• Annual return (GSTR-9)
• Audited accounts (if turnover > ₹2 crore)
• GST audit report (GSTR-9C)
• Fixed asset register with ITC details

Common compliance mistakes and penalties

E-invoicing compliance for large businesses

Businesses with turnover > ₹5 crore must issue e-invoices:

• QR code mandatory: Dynamic QR with IRN
• Real-time validation: Invoice Registration Portal (IRP)
• API integration: Your POS must connect to e-invoice API
• Format compliance: JSON schema as per CBIC guidelines
• IRN generation: 64-character Invoice Reference Number

Audit preparation checklist

Keep these ready for GST department inspection:

GST and POS pricing strategy

Many restaurants display "inclusive of taxes" pricing to avoid checkout surprises. Your POS should reverse-calculate: Menu Price ÷ 1.18 = Base Price, then add 18% GST for accounting clarity.

For example, if your menu shows "Butter Chicken ₹350," your POS treats this as:

• Base price: ₹296.61
• GST (18%): ₹53.39
• Total: ₹350

State-specific GST considerations

Interstate vs intrastate billing

Your POS system must handle different tax structures based on customer location:

State-wise VAT on alcohol

Alcohol is outside GST purview. Each state has different VAT rates:

• Maharashtra: 25% VAT on beer, 40% on spirits
• Delhi: 20% VAT on beer, 70% on spirits
• Karnataka: 17% VAT on beer, 40% on spirits
• Tamil Nadu: 20% VAT on beer, 50% on spirits
• Gujarat: Prohibition state (no alcohol sales)

Your POS should separately calculate alcohol VAT based on outlet location.

Union Territory special considerations

UTs have different GST structures:

• Delhi, Chandigarh, Puducherry: CGST + SGST (like states)
• Others (Lakshadweep, Andaman): CGST + UTGST
• J&K, Ladakh: CGST + SGST (post-statehood changes)

Technical implementation in POS systems

POS software configuration essentials

Configure your system correctly for seamless GST compliance:

Tax Code: CGST_9
Tax Rate: 9.00%
Tax Type: CGST
Account: CGST Payable
HSN Required: Yes

Tax Code: SGST_9  
Tax Rate: 9.00%
Tax Type: SGST
Account: SGST Payable
HSN Required: Yes

Tax Code: IGST_18
Tax Rate: 18.00%
Tax Type: IGST
Account: IGST Payable
HSN Required: Yes

Item master configuration

Each menu item needs proper tax setup:

Item: Butter Chicken
HSN Code: 996331
Tax Group: Rest_18 (CGST_9 + SGST_9)
Price: ₹350 (inclusive)
Base Price: ₹296.61 (auto-calculated)

Item: Packaged Water  
HSN Code: 2201
Tax Group: Water_12 (CGST_6 + SGST_6)
Price: ₹20 (inclusive)
Base Price: ₹17.86

Dynamic rate calculation logic

Modern POS systems use algorithms for complex scenarios:

if (room_rate >= 2500) {
    gst_rate = 18;
    tax_group = "Hotel_18";
} else if (room_rate >= 1000) {
    gst_rate = 5;
    tax_group = "Hotel_5";
} else {
    gst_rate = 0;
    tax_group = "Hotel_Exempt";
}

Integration with accounting software

Automated data export for popular accounting platforms:

Tally Integration Format:

• Sales Account: Restaurant Sales - 18%
• CGST Account: CGST Payable @ 9%
• SGST Account: SGST Payable @ 9%
• Customer Ledger: Cash/Card Sales

Zoho Books API Integration:

• Real-time invoice sync
• Automatic tax calculation
• GSTR-1 report generation
• Customer GST validation

Troubleshooting common GST issues

POS system errors and solutions

Invoice generation issues

Compliance verification tools

Built-in POS Checks:

• GSTIN validator: Real-time verification
• HSN checker: Valid code verification
• Rate validator: Current rate verification
• Invoice completeness: Mandatory field checker

External Validation Tools:

• GST Portal: GSTIN verification
• CBIC Website: Latest rate notifications
• NIC Portal: HSN/SAC code search
• API Services: Real-time tax validation

Advanced GST scenarios for chain operations

Multi-location business complexities

Franchise and chain operations face unique challenges:

Centralized vs Distributed GSTIN:

• Single GSTIN: Simplified filing, complex logistics
• Multiple GSTIN: Location-wise compliance, individual filing
• Recommended: Separate GSTIN per state

Inter-branch transfers:

• Stock transfer between branches attracts GST
• Use delivery challan for movement
• Maintain transfer pricing documentation
• E-way bill required for interstate transfers > ₹50,000

Franchise GST management

Future GST developments for hospitality

Upcoming changes to watch

• E-invoicing expansion: Threshold may reduce to ₹1 crore
• Real-time reporting: Similar to European models
• AI-based compliance: Automated anomaly detection
• Blockchain integration: Immutable transaction records
• QR code payments: Integrated GST tracking

Technology trends

• Cloud-first compliance: Automatic updates and backups
• Mobile POS integration: Tableside billing with GST
• Voice-enabled billing: "Add butter chicken with 18% GST"
• Predictive analytics: GST liability forecasting

Frequently Asked Questions

Is service charge subject to GST?

Service charge itself is not GST, but depending on how it's structured, it may attract GST. If treated as part of the service price, it's included in the taxable value. Consult your chartered accountant for your specific case.

How to handle GST for food delivery?

Delivery charges are typically treated as a separate service attracting 18% GST. The food itself also attracts 18% GST for AC restaurants. Configure your POS to handle both components separately.

What if a customer requests a tax invoice?

All bills above ₹200 should automatically include GST details. For B2B customers, collect their GSTIN and ensure it appears on the invoice along with HSN/SAC codes for each item.

Can we claim input tax credit on POS software?

Yes, GST paid on POS software subscriptions qualifies for input tax credit. Keep invoices from your software vendor for ITC claims.

How often should we file GST returns?

Monthly (GSTR-1 and GSTR-3B) for businesses above ₹5 crore annual turnover, quarterly for smaller businesses. Your POS system should generate the required reports for easy filing.

What happens if GST rates change?

Modern cloud POS systems like urbanPOS automatically update tax rates. Always verify with your software provider that rate changes are applied correctly.

How to handle customer complaints about GST charges?

Train your staff to explain that GST is a government tax, not a restaurant charge. Show the tax breakup clearly on bills and explain that prices are inclusive of GST as per menu display.

What to do during GST raids or inspections?

Cooperate fully, provide all requested documents, ensure your CA is present, and maintain digital backups of all records. Never obstruct or provide false information.

Can we get refunds on excess GST paid?

Yes, you can claim refunds through GSTR-11 for excess tax paid. Common scenarios include input tax credit accumulated, advance tax paid, or tax paid on exports.