This article presents the findings of an impact analysis on the restaurant and food industries, which are very close to our hearts or, more accurately, our stomachs.
We assist you in comprehending the GST on food items, the GST on restaurants, and the GST-affected appearance of a restaurant bill. We also describe how the GST rates on food at hotels and freestanding restaurants differ from one another. Finally, learn how the GST will affect owners, end users, and the sector as a whole.
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Understanding a pre-GST Restaurant Bill
As final customers, we rarely look at our food bill at these establishments, and the majority of us aren’t even aware of the ingredients. You will notice that service tax, service charge, and VAT have been added on top of the food value if you go back and look at your meal bill from the pre-GST fine-dining experience.
Let’s first examine the bill’s components:
- The tax that is applied to the food component of your bill is known as VAT.
- The tax imposed on the services rendered by the restaurant is known as the service tax. [The government had already separated the food and service portions and assessed taxes appropriately to prevent needless problems.]
- Service charge the government does not impose this fee; eateries do. IT’S NOT A TAX. Since it is a source of revenue for the hotels, it should not be confused with service tax. On the other hand, service tax is only a tax that is collected from you and sent to the government; it is not considered income.
The rates under the GST, however, differ significantly from those that existed before the change in tax laws. Below, let’s examine these altered rates.
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GST Rules for Restaurants
Restaurants are subject to either the 18% GST rate with input tax credit (ITC) claims or the 5% GST rate with no ability to claim ITC. This price is determined by the restaurant’s location. For example, restaurants located within hotels where the room tariff beyond the designated level would be subject to a higher GST rate.
The GST rates that apply to food, catering, and restaurant services are decoded in the tables below.
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GST Rate on Restaurant Services
| S 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 |
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This excludes any hotel accommodations services and includes people who provide food or other services in hotels with room rates of at least Rs 7,500.
GST Rate on Food Items
The GST rates for common food items are as follows. Note that this is by no means an all-inclusive list.
| 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% |
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Impact on Restaurant Business Owners
Although the service tax and VAT amounts would be combined into a single rate under the GST regime, service charges can still appear on your meal bill. We’ve included a high-level comparison of your food bill before and after GST below.
In this case, we’ve assumed that VAT is applied at 100% of the value, with no reduction.
| Particulars | Billing under VAT regime | Billing under GST regime |
| Total Bill | 5000 | 5000 |
| Output Tax | ||
| VAT @14.5% | 725 | |
| Service tax@6% | 300 | |
| GST @5% | 250 | |
| Total output tax liability | 1025 | 250 |
| Input credit | ||
| VAT ITC (no ITC on ST) | 75 | |
| GST ITC | – | |
| Final Output tax liability | ||
| VAT | 650 | |
| Service Tax | 300 | |
| GST | 250 |
The entire amount owed to the tax authorities under the current regime, as shown in the example above, is Rs. 950. Nonetheless, the net outflow from the pocket under GST will be Rs. 250.
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