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GST on Food and Restaurants

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 rates on Food, Beverage Services, and Accommodation

Description Applicable GST Rate
Food services provided by restaurants including takeaway facility (both air-conditioned and non a/c)

 

5% with No ITC
Any food/drink served at cafeteria/canteen/mess operating on a contract basis in the office, industrial unit, or by any school, college, etc on basis of a contractual agreement that is not event-based or occasional

 

5% with No ITC
Services provided by restaurants within a hotel with room tariff less than Rs. 7,500

 

5% with No ITC
Services provided by restaurants within a hotel with a room tariff of Rs. 7,500 ore more

 

18%
Meals/food services provided by Indian Railways/IRCTC or their licensees both in trains or at platforms

 

5% with No ITC
Food services provided in a premise arranged for organizing function along with renting of such premises

 

18%
Food services provided at exhibitions, events, conferences, outdoor & indoor functions that are event-based or occasional in nature

 

18%
Other Accommodation, food, and beverage services

 

18%

 Note: Then rates given in the list are subject to periodic change

GST on Food items

Description Applicable GST Rate
GST on fresh/chilled vegetables such as potatoes, onions, garlic, leek, etc. Nil
GST on non-container dried leguminous packed vegetables(shelled) whether skinned/split or not NIL
GST on fruits such as fresh grapes, fresh/dried coconut, fresh/dried bananas/plantain, fresh apples, fresh pears, etc. Nil
GST on non-veg items such as meat (not in a container, whether fresh or chilled) Nil
GST on eggs in the shell (fresh/cooked/preserved) Nil
GST on unsweetened milk (pasteurized/unpasteurized), cream, etc. Nil   
GST on container packed vegetables (uncooked/steamed/boiled) Nil
GST on vegetables preserved using brine/other means unsuitable for immediate human consumption Nil
GST on meat packed in a container having a registered trademark or brand name 5%
GST on eggs not in shell/egg yolks boiled or cooked by steaming 5%
GST on dried leguminous vegetables packed in a container having a registered trademark/brand name (skinned/split or not) 5%
GST on vegetables such as ginger (excluding fresh ginger), turmeric (excluding fresh turmeric), thyme, curry leaves, bay leaves, etc. 5%
GST on food such as meal/powder of dried leguminous vegetables 5%
GST on fruits, vegetables, nuts, and edible plant parts preserved using sugar 12%
GST on vegetables, fruits, nuts, and edible parts of the plant that are preserved/prepared using vinegar/acetic acid. 12%
GST on food items prepared using flour, malt extract, etc. including cocoa less than 40% of total weight. 18%
GST on chocolate and other cocoa products   18%

 Note: The GST rates on food products given in the list are subject to periodic change

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.

GST on Food and Restaurants - FAQs

Q1. Is GST levied on takeaway food?

Takeaway Food is subject to an 18% GST rate.

Q2. Can restaurants accept GST?

The GST rate levied on all restaurants (including AC and non-AC, both alcoholic and non-alcoholic) is 5% without an input tax credit. The GST rate applicable to small-size restaurants operating within hotels (room tariffs less than 7500 Rs) is 5% excluding ITC.

Q3. Is there a GST fee on café food?

The restaurant deducts a 9% CGST and a 9% SGST from the bill amount, with no further levies absorbed. AC restaurants are subject to a 5% GST. Restaurant (AC or non-AC) in a hotel with a daily price of Rs 7,500 or more – 18% Restaurant pre-packaged and pre-cooked cuisine – 12%

Q4. Is there a sales tax on fruits and vegetables?

Fresh and/or refrigerated fruits and vegetables have been exempted from GST, which is consistent with the previous VAT regulations enacted in several states. As a result, fresh unprocessed items acquired directly from an agriculturist, dealer, or retailer are excluded.

Q5. What foods are excluded from GST?

The foods that are excluded are:

  • Bread
  • Cooking ingredients – flour, sugar, and more
  • Milk, cream, cheese ad eggs.
  • Spices
  • Fruit juice
  • Bottled water
  • Tea and Coffee
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