GST on food a consumption-based tax called GST is applied to the value added at every step of the production and distribution processes. The GST is applied to food and restaurant services according to the kind of restaurant and services rendered. With the implementation of GST, it is crucial for both consumers and businesses in the food sector to understand the rules and rates governing the taxation of food items and restaurants.
How does GST affect restaurants and food?
It is crucial to comprehend what restaurant GST entails whether you are a patron or a business owner managing a food operation. Depending on the type of establishment, the government charges a GST to restaurants. The GST that restaurants are currently required to pay to the government when filing their taxes is 5%, 12%, and 18%.
Food services previously subject to Value Added Tax and Service Tax have been replaced with a Goods and Services Tax (GST) system. The above-mentioned basic restaurant GST rates are what eateries get from their final consumers and submit to the government.
Read also: GST: Taxpayers may be allowed to file revised GST returns from April 2025
Nonetheless, small eateries can choose the GST composition scheme and pay a fixed tax rate that is less than the standard GST rate if their annual turnover does not exceed Rs. 1.5 crores. Subject to certain requirements, restaurants may also be eligible for an Input Tax Credit (ITC) on the GST paid on their inputs, which include rent, utilities, and raw materials.
GST rates on Food, Beverage Services, and Accommodation
Here is a detailed table to understand the GST rates on food, beverages, services and accommodation.
|
Particulars |
Applicable GST Rate |
|
Food services by restaurants that may or may not have air conditioning (including takeaway) |
5% with no Input Tax Credit |
|
Any food or drink served at the canteen/cafeteria/mess operating on a contractual basis in an office, school, industrial unit, etc., when the contract is not occasional or event-based |
5% with no Input Tax Credit |
|
Food services provided by a restaurant operating within a hotel with a room tariff of Rs 7,500 or more |
18% |
|
Food services provided by a restaurant operating within a hotel with a room tariff of Rs 7,500 or less |
5% with no Input Tax Credit |
|
Food service provided by the Indian railways on platforms and trains |
5% with no Input Tax Credit |
|
Food services provided by a licenced entity on a premise utilised for organising a function while renting the premise |
18% |
|
Food services provided at events, conferences, exhibitions and indoor or outdoor functions that are occasional and event-based |
18% |
|
Any other food, beverage service and accommodation services |
18% |
GST on Food items
Here is a detailed table to understand the GST on restaurants for food items:
|
Particulars |
Applicable GST Rate |
|
GST on freeze/fresh vegetables |
NIL |
|
GST on non-container dried leguminous packed vegetables(shelled), whether skinned/split or not |
NIL |
|
GST on fruits such as apples, oranges, grapes, etc. |
NIL |
|
GST on non-vegetarians food items (whether fresh or chilled) |
NIL |
|
GST on eggs in shells (whether fresh, cooked or preserved) |
NIL |
|
GST on cream, unsweetened milk (whether pasteurised or unpasteurised) |
NIL |
|
GST on packed vegetables in a container (whether steamed, boiled or uncooked) |
NIL |
|
GST on vegetables preserved using means unsuitable for immediate human consumption |
NIL |
|
GST on contained packed meat having a brand name or trademark |
5% |
|
GST on eggs not in the shells or egg yolks cooked or boiled by steaming |
5% |
|
GST on container-dried leguminous packed vegetables having a brand name or trademark ()whether skinned/split or not) |
5% |
|
GST on vegetables such as thyme, curry leaves, ginger (not fresh), etc. |
12% |
|
GST on vegetables, nuts, fruits and edible parts of plants that are preserved by a means |
12% |
|
GST on flour-based food items, including less than 40% cocoa of total weight |
18% |
|
GST on chocolate and chocolate-based products |
18% |
Read also: GST Council may consider raising GST registration limit from Rs 40 lakh to Rs 60 lakh
GST’s Effect on Restaurants and Food Products
Several indirect taxes have been replaced in India by the comprehensive Goods and Services Tax (GST). The Indian restaurant and food industries have been greatly impacted by the GST on eateries.
Here are some of how GST on restaurant services and food items has affected the industry:
Easier Tax Administration
With the GST on restaurants, there is now only one tax instead of several, simplifying taxation. Restaurants and food businesses now find it simpler and less expensive to comply with tax regulations thanks to the Goods and Services Tax (GST) on their food.
Nevertheless, compared to the prior tax structure, the current restaurant GST rates are higher. The tax burden on eateries and food-related enterprises has increased as a result.
Lower Tax Liability
Restaurants and food businesses can claim Input Tax Credits under the GST on restaurant services, which helps lower their overall tax liability by accounting for taxes paid on purchases.
Higher Degree of Transparency
Because ST requires businesses to keep accurate records and file regular tax returns, it has increased compliance and decreased tax evasion while also bringing about greater transparency in the food industry.
Impact on Prices
Prices in the restaurant and food industries have been affected by the GST in different ways. The Input Tax Credit has assisted in bringing down the cost of certain goods even as the tax rates on others have gone up. The effect on prices has been relatively mild overall.
Read also: Valuation rules for GST on e-gaming platforms effective prospectively
Conclusion:
The restaurant and food industries have seen tremendous changes as a result of GST. It has made taxation simpler and more transparent, but it has also made businesses face a heavier tax burden. The Input Tax Credit’s ability to be claimed, however, has had a mixed effect on prices.
The GST system has brought about a much-needed system overhaul despite the early difficulties, and it might eventually be advantageous for the industry. The GST rates for restaurants could alter in the upcoming years as the government works to improve the system.
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