Tax for food businesses in India

A food business is taxed as a business on presumptive Section 44AD (6% digital, 8% other), not 44ADA. Standalone restaurant, cloud-kitchen and food-truck service is GST 5% with no input-tax credit (18% only inside premium hotels), the restaurant composition route is also 5%, and delivery platforms deduct income-tax under Section 194O and handle GST on supplies made through them.

Presumptive + GST + TDS at a glance

Presumptive taxation

Section:: Sec 44AD
Deemed profit rate:: 6% on digital receipts / 8% on other receipts
Classification:: business

GST treatment

Slab:: 5%
SAC:: 996331 restaurant service (5% no ITC)
Composition eligible:: Yes
Reverse charge (RCM):: Not applicable

TDS exposure

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

A food business in India is taxed as a business, so presumptive taxation under Section 44AD is the simplest fit, not Section 44ADA. On GST, standalone restaurant and cloud-kitchen service is taxed at 5% with no input-tax credit, the restaurant composition route is also 5%, and supplying packaged or branded food as goods follows the goods rates. Delivery-platform orders bring in TCS under Section 52 of the CGST Act and the platform's own GST handling.

What business structure do food businesses use?

The common patterns for food businesses are: Sole proprietor, simplest, suits a single outlet or food truck on 44AD, Partnership or LLP, for co-founders sharing a kitchen and capital, Private limited, for multi-outlet or investor-backed food brands. The right structure depends on revenue, liability exposure, and personal circumstances, covered below.

Income tax: Section 44AD, not 44ADA

Running a food business is a business, not a notified profession, so presumptive taxation is under Section 44AD: a deemed 8% of turnover, or 6% on digital receipts, with no detailed books or audit within the limits. The ceiling is Rs 2 crore, or Rs 3 crore where cash receipts are 5% or less, which rewards UPI and card payments. Section 44ADA does not apply to a food business.

A food business declares deemed profit of 6 or 8% of turnover under Section 44AD up to Rs 3 crore where cash is 5% or less. (Income-tax Act 1961 s.44AD (Income-tax Act 2025 s.58))

GST: 5% on restaurant service, no input credit

Standalone restaurant, cafe, cloud-kitchen and food-truck service is taxed at 5% GST with no input-tax credit, so you cannot recover GST on rent, equipment or ingredients. Restaurants located in a hotel with declared room tariff above Rs 7,500 are taxed at 18% with input credit instead. The restaurant composition scheme is also 5% (turnover up to Rs 1.5 crore) and is even simpler. Selling packaged or branded food as goods follows the relevant goods rate, not the 5% restaurant rate.

Standalone restaurant and cloud-kitchen service is GST 5% with no input-tax credit (18% only inside premium hotels); restaurant composition is also 5%. (CGST Act 2017 (rate notifications); SAC 996331; composition s.10)

Delivery platforms: Section 194O and Section 52 TCS

When you sell through a delivery platform, the platform deducts income-tax TCS-style collection and reports your sales, and under Section 194O it deducts income-tax at source on the gross order value. Separately, the platform handles GST on restaurant supplies made through it. Reconcile the platform statements against your declared turnover, because mismatches between platform-reported sales and your return are a common scrutiny trigger.

E-commerce delivery platforms deduct income-tax under Section 194O and handle GST on restaurant supplies made through them; reconcile their statements to your turnover. (Income-tax Act 1961 s.194O (2025 Act s.393); CGST Act s.52 (TCS) + restaurant-via-ECO notification)

Allowable expenses

Category	Examples	Tax treatment
Ingredients and supplies	Raw food, packaging, disposables, gas	Cost of sale; no GST input credit under the 5% restaurant rate
Kitchen equipment	Stoves, fridges, chimney, utensils, POS	Deductible; subsumed in deemed profit under 44AD
Premises	Rent, electricity, water, licences (FSSAI, trade)	Deductible if keeping books; in deemed profit under 44AD
Staff wages	Cooks, helpers, delivery riders	Deductible if keeping books; pay over Rs 10,000/day by bank (40A(3))
Platform commission	Delivery-aggregator commission and fees	Deductible business expense
Licences and compliance	FSSAI registration, GST filing, accountant	Deductible business expense

Vehicle and travel costs

A food truck or delivery vehicle is a business asset: under regular books claim depreciation (plant-and-machinery or motor-vehicle block, Section 32) plus running costs. Under presumptive Section 44AD depreciation is treated as already allowed within the deemed profit, and the written-down value still reduces for a future sale.

Capital allowances and equipment

On regular books, kitchen equipment and a food truck depreciate in the plant-and-machinery / motor-vehicle block (generally 15% WDV). Under Section 44AD no separate depreciation is claimed, but keep invoices so the written-down value is correct on any later sale.

Worked example

Fatima — Hyderabad, TG

cloud-kitchen owner (delivery-only) (2026-27)

Annual turnover Rs 40 lakh, almost all through delivery platforms (digital). The platforms deduct 194O income-tax and handle GST on the supplies. She buys ingredients and a new oven.

For income tax, deemed profit under 44AD is 6% of Rs 40 lakh = Rs 2,40,000, below the Rs 4 lakh new-regime exemption, so income tax is nil; she files and reclaims the 194O tax deducted by the platforms. For GST, her restaurant service is taxed at 5% with no input credit, so she cannot recover GST on the oven or ingredients (a reason some operators model the 18%-with-credit option only if eligible). She reconciles each platform statement against her turnover to avoid a mismatch flag.

Common audit triggers for food businesses

Platform-reported sales (194O / Section 52) not matching declared turnover
Cash receipts over 5% of turnover while using the Rs 3 crore 44AD limit
Claiming input credit while on the 5% no-ITC restaurant rate
Cash receipt of Rs 2 lakh or more from one party in a day (Section 269ST)
Staff wages paid in cash over Rs 10,000 per person per day (Section 40A(3))
No GST registration after crossing the threshold (Rs 20 lakh services)

Frequently asked questions

Can I claim GST input credit on my restaurant costs?+

No, not on the 5% standalone-restaurant rate. The 5% rate comes with no input-tax credit, so GST on rent, equipment and ingredients is a cost you cannot recover. The 18% rate with credit applies only to restaurants inside hotels with declared room tariff above Rs 7,500. Most standalone outlets are on 5% no-credit.

Should a food business use 44AD or 44ADA?+

Section 44AD. A food business is a business, not a notified profession, so you declare a deemed 8% of turnover (6% on digital receipts), not the 50% that 44ADA applies to professionals. Take payment digitally through UPI, cards and platforms to stay under the 5% cash condition for the higher Rs 3 crore limit.

How do delivery platforms affect my tax?+

Platforms deduct income-tax at source under Section 194O on your gross order value and report your sales, and they handle GST on restaurant supplies made through them. The key task is reconciliation: make sure the sales the platforms report match the turnover in your return, because mismatches are a common scrutiny trigger.

Is the restaurant composition scheme worth it?+

It can be, for a small outlet. The restaurant composition rate is 5% (turnover up to Rs 1.5 crore) and is simpler, quarterly payment, less detailed filing, with no input credit. Since the standard standalone-restaurant rate is also 5% with no credit, composition mainly buys simplicity. Compare the compliance load with your accountant.

Last reviewed: 29 May 2026