GST Applicability & Tax Rates on Food
GST on Food
GST on Food
We help you understand all about GST on food items, GST on restaurants, and how a restaurant bill will look under GST. We also explain the different GST rates applicable on foods in hotels vs. the GST rate on foods in standalone restaurants. Lastly, find out the implications of GST on the end consumers, the owners, and the overall industry.
According to the National Restaurant Association of India’s 2019 India Food Service Report, the size of the Indian food service industry was 1,48,353 crore in 2018-19 and is projected to grow to Rs 2,57,907 crore in 2022-2023 with a CAGR of 15%.
This growth is further fuelled by the growth of the great Indian middle class. Rapid urbanisation, growing awareness of western lifestyles, more women joining the workforce, and higher disposable income were some of the factors that contributed to the growth of the restaurant industry. As a result, we find ourselves waiting in queues in most of the restaurants during the weekend.
GST RATES
GST on food items in India can be 5%, 12%, or 18% based on factors such as the establishment type and location of restaurants or food service providers among others. Goods and services tax has replaced the VAT and Service tax regime on food services. However, the point to note here is the service charge by restaurants is separate from GST.
Alcoholic beverages have applicable Value Added Tax, which is a state-level tax, therefore restaurants serving both food and alcoholic beverages will levy separate taxes with GST applying to food and non-alcoholic beverages; however, VAT will be charged on alcoholic beverages served.
GST on food items is applicable to the purchase of items by the common man which currently features rates ranging from nil to 18% GST.
What were the Original GST Rules for Restaurants?
When the GST was first launched in July 2017, restaurants could fall into three different rate slabs. If the restaurant did not have air conditioning, the GST charged was 12%. For a restaurant with AC or a liquor license, 18% GST is applicable. For restaurants within five-star hotels, the GST rate was set at 28%, and at that time, all Indian restaurants in India could take advantage of the input tax credit.
This implies that when you paid GST while buying supplies for your restaurant, you could subtract that amount from your tax bill. That helped reduce costs for many restaurants.
GST Rate on Restaurant Services
| Sl No. | Type of Restaurants | GST Rate |
|---|---|---|
| 1 | Food supplied or catering services by Indian Railways/IRCTC | 5% without ITC |
| 2 | Standalone restaurants, including takeaway | 5% without ITC |
| 3 | Standalone outdoor catering services or food delivery service | 5% without ITC |
| 4 | Restaurants within hotels (Where room tariff is less than Rs 7,500) | 5% without ITC |
| 5 | Normal/composite outdoor catering within hotels (Where room tariff is less than Rs 7,500) | 5% without ITC |
| 6 | Restaurants within hotels* (Where room tariff is more than or equal to Rs 7,500) | 18% with ITC |
| 7 | Normal/composite outdoor catering within hotels* (Where room tariff is more than or equal to Rs 7,500) | 18% with ITC |
GST Rate on Food Items
1. Containerized veggies (steamed, uncooked, or boiled) have no GST.2. Vegetables preserved with brine or other methods that are unfit for immediate human consumption are exempt from GST.3. Meat packed in a container with a registered trademark/brand name is subject to a 5% GST.4. 5% GST on non-in-shell avian eggs and egg yolks boiled or steam-cooked.5. GST is 5% on ginger (excluding fresh ginger), turmeric (except fresh turmeric), thyme, curry leaves, bay leaves, and other herbs and spices.6. 5% GST on dried leguminous vegetables (skinned/split or not) packed in containers with a registered brand name (skinned/split or not)7. 12% GST on sugar-preserved vegetables, fruits, nuts, and edible plant parts8. Foods such as meal/powder of dried leguminous vegetables are subject to a 5% GST.9. 12% GST on the vinegar/acetic acid, preserved/prepared vegetables, fruits, nuts, and edible plant components.10. 18% GST on food preparations containing less than 40% cocoa by weight, such as those made with flour, malt extract, and so on.The following are the GST rates on popular food items.
| Particulars | GST Rate |
| GST on fresh and/or chilled vegetables | Nil |
| GST on frozen vegetables | Nil |
| GST on dried vegetables that are packaged and labelled | 5% |
| GST on dried leguminous vegetables other than pre-packaged and labelled | Nil |
| GST on dried leguminous vegetables that are pre-packaged and labelled | 5% |
| GST on fresh/dried coconuts, grapes, apples, bananas, and pears, among others | Nil |
| GST on fruits like grapes, apples, bananas, pears, mangoes, citrus fruits, and berries, among others | Nil |
| GST on vegetables, fruits, nuts, and edible plant parts that are preserved using sugar | 12% |
| GST on fruits, nuts, and edible plant parts that are preserved and/or prepared using vinegar and/or acetic acid. | 12% |
| GST on fresh milk, pasteurised milk (excluding UHT milk), and milk and cream (not concentrated nor contains added sugar or sweeteners) | Nil |
| GST on milk and cream that is concentrated or contains added sugar or sweeteners | 5% |
| GST on curd, lassi, and buttermilk, other than pre-packaged and pre-labelled | Nil |
| GST on curd, lassi, and buttermilk that is pre-packaged and pre-labelled | 5% |
| GST on yoghurt and cream, whether containing sugar/flavouring or not | 5% |
| GST on fresh or chilled meat and fish | Nil |
| GST on meat that is packaged and labelled | 5% |
| GST on birds’ eggs in shells | Nil |
| GST on birds’ eggs which are not in a shell | 5% |
| GST on rice other than pre-packaged and labelled | Nil |
| GST on rice, pre-packaged and labelled | 5% |
| GST on wheat or meslin (i.e. maize flour) other than pre-packaged or labelled | Nil |
| GST on wheat or meslin, pre-packaged and labelled | 5% |
| GST on rye other than pre-packaged and labelled | Nil |
| GST on rye, pre-packaged and labelled | 5% |
| GST on cereal flours other than of wheat or meslin, rye, etc., pre-packaged and labelled. | 5% |
| GST on chocolate and food preparations containing cocoa | 18% |
Effect of GST on Restaurant and Food Items
After the inception of GST, a simplification of the bill was witnessed by those eating out at restaurants, as restaurant GST rate replaced multiple taxes and cesses such as VAT, Service Tax, and Krishi Kalyan cess to name a few.
Furthermore, a decrease in the effective tax on restaurant bills was also evident to customers after GST implementation. But the decrease in the cost for those who are eating out was observed to be marginal at best. However, the service charge has not been affected by GST and is still applied by the restaurant.
For restaurant owners, the Input Tax credit or ITC was expected to increase the working capital availability for restaurants after the implementation of GST. On the contrary, The introduction of GST brought with it the removal of the Input Tax Credit or the ITC. This implies that the GST they paid on raw materials and rent could not be claimed.
Later, certain amendments were made which reduced the ITC benefit for restaurant owners. However, it is notable that, under current GST rules, this ITC benefit is available only to those charging 18% GST, while restaurants/eateries charging 5% GST on food services do not receive ITC benefits.
As mentioned in the table above, in terms of food GST rate items including vegetables, fruits, meat, etc., nil GST i.e. GST exemption has been provided in case of most fresh as well as frozen products. The only packed food in containers with a trademark/brand name has GST rates applicable to them. As of now, GST on food items or food services is not charged more than 18% and no food items are as of yet featured in the highest tax bracket of 28%. Thus, no major price fluctuations have been reported after the implementation of GST on food items.
Created & Posted by Sony Garg
Accountant at TAXAJ
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