Why Proper Expense Categorisation Matters
Most Indian restaurant owners know roughly what they spend. But “roughly” isn't good enough when your profit margin is 10-15%. Proper expense categorisation tells you exactly where your money goes — and more importantly, where it shouldn't be going.
When expenses are categorised correctly, you can: spot rising costs before they become problems, benchmark against industry standards, claim maximum GST input credits, make your CA's life easier (and save on accounting fees), and make data-driven decisions about where to cut costs.
Complete Expense Category Breakdown
Food Costs (Raw Materials)
Target: 28-35% of revenueVegetables & Fruits
Daily sabzi mandi purchases. Usually cash, rarely with GST invoice.
Meat, Poultry & Seafood
From wholesale suppliers. Negotiate weekly rates. Watch for weight discrepancies.
Dairy Products
Milk, paneer, curd, butter, cheese. High spoilage risk — track waste separately.
Spices & Condiments
Monthly bulk purchases from wholesale markets. Store properly to extend shelf life.
Oils & Ghee
One of the most expensive recurring items. Price fluctuates — buy in bulk when low.
Grains, Flour & Lentils
Rice, atta, maida, various dals. Bulk monthly purchase.
Dry Goods & Pantry
Sauces, canned goods, pasta, noodles, baking supplies.
Beverage Costs
Target: 5-10% of revenueSoft Drinks & Water
Branded beverages (Coca-Cola, Pepsi). Track per-unit cost vs selling price.
Tea & Coffee
Chai ingredients (tea leaves, sugar, milk) and coffee beans/powder.
Fresh Juices & Shakes
Fruits, milk, ice cream for shakes. High perishability.
Alcohol (if licensed)
Separate GST category. Track carefully — high margins but requires license compliance.
Staff Costs
Target: 20-30% of revenueSalaries & Wages
Monthly salaries for permanent staff. The largest expense after food cost.
PF & ESI Contributions
Mandatory if you have 20+ employees (PF) or 10+ employees (ESI). Factor into cost-to-company.
Staff Meals
Two meals per shift is standard. Track food cost of staff meals separately.
Bonuses & Incentives
Festival bonuses (Diwali, Eid), performance incentives, overtime pay.
Uniforms & Grooming
Aprons, caps, shoes, grooming supplies. Usually a one-time seasonal expense.
Rent & Utilities
Target: 10-15% of revenueRent
Your second largest fixed cost. Negotiate annual increases. Aim for rent under 10% of revenue.
Electricity
Kitchen equipment, AC, lighting. One of the highest variable costs. Monitor monthly.
Water
Municipal water + tanker water. Track separately if tanker costs are significant.
Gas (LPG/PNG)
Cooking gas cylinders or piped gas. Track consumption per month.
Internet & Phone
WiFi, POS connectivity, phone lines. Essential but usually a small percentage.
Kitchen & Equipment
Target: 2-5% of revenueEquipment Maintenance
AC servicing, exhaust cleaning, refrigerator repairs. Budget ₹5-10K/month.
Smallwares
Utensils, crockery, glassware replacements. Budget for breakage (1-2% of crockery/month).
Kitchen Supplies
Aluminium foil, cling wrap, garbage bags, cleaning chemicals, tissues.
Equipment Purchase
Capital expense — mixer grinders, tandoors, deep fryers. Depreciate over 3-5 years.
Marketing & Sales
Target: 3-5% of revenueDelivery Platform Commissions
Swiggy/Zomato take 18-25% + GST on commission. Your biggest marketing expense. Track carefully.
Social Media & Ads
Instagram ads, Google Ads, food blogger collaborations, photography.
Promotions & Discounts
Happy hour discounts, festival offers, loyalty programs. Track the cost of each promotion.
Packaging
Takeaway containers, bags, cutlery, napkins. Rising cost — track per-order packaging cost.
Licenses & Compliance
Target: 1-2% of revenue (annualized)FSSAI License
Mandatory food safety license. ₹5,000-25,000 depending on type and turnover.
Trade License / Shop License
Municipal corporation trade license. Annual renewal.
Fire NOC
Fire department No Objection Certificate. Required for dine-in restaurants.
Liquor License
If serving alcohol. Costs vary significantly by state. Annual renewal.
GST Registration & Filing
CA fees for monthly GST filing. ₹2,000-5,000/month for most restaurants.
Music License (PPL/IPRS)
If playing music in the restaurant. Annual license required.
Miscellaneous & Petty Cash
Target: 2-4% of revenueTransport & Delivery
Fuel for delivery bikes, auto/taxi for urgent purchases, courier charges.
Printing & Stationery
Menu printing, bill books, visiting cards, registers, pens.
Tips & Gratitude
Tips to delivery partners, building security, garbage collectors.
Repairs & Maintenance
Plumbing, electrical work, paint touch-ups, pest control.
Insurance
Fire insurance, employee insurance, public liability. Often overlooked but important.
Ideal Expense Ratios for Indian Restaurants
| Category | % of Revenue |
|---|---|
| Food Cost | 28-35% |
| Beverage Cost | 5-10% |
| Staff Cost | 20-30% |
| Rent & Utilities | 10-15% |
| Equipment & Maintenance | 2-5% |
| Marketing & Commissions | 3-5% |
| Licenses & Compliance | 1-2% |
| Miscellaneous | 2-4% |
| Total Expenses | 71-96% |
| Net Profit Target | 10-15% |
GST Implications by Category
Restaurants registered under GST can claim Input Tax Credit (ITC) on business expenses — but only if you have valid GST invoices. This is why categorising expenses by GST eligibility matters:
GST-eligible (keep invoices)
Branded supplies, equipment purchases, maintenance services, packaging materials, professional services, technology subscriptions
Usually no GST invoice
Sabzi mandi purchases, local vendor cash payments, auto/taxi fares, small repairs, tips
Exempt from GST
Fresh vegetables, fruits, milk, eggs, unbranded food grains, municipal water
Pro tip: Switching from local cash vendors to GST-registered wholesale suppliers can save 5-12% through input tax credits — even if the base price is slightly higher.
Track All Categories with Restaurant Daily
Restaurant Daily comes with all these categories pre-built. When your team creates an expense voucher, they pick a category from the list — it takes 2 seconds. You get automatic daily and monthly breakdowns by category.
See instantly if your food cost is creeping up. Track packaging costs per order. Compare this month's utilities against last month. Export everything as CSV for your CA. No spreadsheets needed.