GST on food and restaurants involves various tax rates depending on the type of establishment and menu items. It also affects input tax credit availability, influencing the overall cost of dining out and the dynamics of the restaurant industry in India.
What is GST on Restaurant?
Goods and Services Tax (GST) is a consumption-based tax levied on the value added at each stage of production and distribution. In the case of food and restaurants, the GST is levied based on the type of restaurant and the services provided.
Understanding GST on Food Bills
Restaurant bills typically include the following components:
- Food and beverage charges
- Service charge
- GST
The GST rate applicable to food and restaurant services is 5% for non-air-conditioned restaurants and 18% for air-conditioned restaurants. Additionally, the GST rate is 18% for restaurants serving alcoholic beverages. Furthermore, outdoor catering services are also subject to a GST rate of 5%.
GST Rules for Restaurants
Restaurants must have done GST registration if their annual turnover exceeds Rs. 40 lakhs. However, restaurants located in North-Eastern states and the Union Territories of Jammu & Kashmir, Ladakh, Andaman and Nicobar Islands, and Dadra and Nagar Haveli and Daman and Diu are required to register for GST if their annual turnover exceeds Rs. 20 lakhs.
Restaurants must collect GST from their customers at the prescribed rate and deposit it with the government. Restaurants can also claim an input tax credit (ITC) on the GST paid on their purchases.
GST Rates on Restaurant Foods
The GST rate applicable to food and restaurant services is as follows:
- Non-air-conditioned restaurants: 5%
- Air-conditioned restaurants: 18%
- Restaurants serving alcoholic beverages: 18%
- Outdoor catering services: 5%
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Role of GST on Restaurant Sector
The implementation of GST has had a significant impact on the food and restaurant sector. GST has brought all food and restaurant services under a single tax regime, simplifying the tax compliance process for businesses. Additionally, GST has reduced the overall tax burden on the food and restaurant sector, which has benefited both businesses and consumers.
History of Taxation in the Food and Restaurant Industry
Prior to the implementation of GST on restaurant industry was subject to a variety of taxes, including:
- Value Added Tax (VAT)
- Service Tax
- Krishi Kalyan Cess
- Luxury Tax
- Local Taxes
The pre-GST tax regime was complex and cumbersome, and it created a cascading effect, where the end consumer paid tax on tax.
Impact of GST on Restaurant and Food Items
- GST has simplified the tax compliance process for restaurants and other businesses in the food and restaurant industry.
- GST has reduced the overall tax burden on the food and restaurant sector, which has benefited both businesses and consumers.
- GST has made food and restaurant services more affordable for consumers.
- GST has helped to reduce the cascading effect of taxes, which has made the food and restaurant sector more efficient and competitive.
Input Tax Credit (ITC) in the Food Business
Input Tax Credit (ITC) is a mechanism that allows businesses to claim credit for the GST paid on their inputs, such as raw materials, goods, and services. This helps to reduce the overall tax burden on businesses and makes their products and services more competitive.
Restaurants and other businesses in the food and restaurant sector are eligible to claim ITC on the GST paid on their inputs, such as food items, beverages, and packaging materials. This helps to reduce the cost of doing business and makes food and restaurant services more affordable for consumers.
GST rates on Food, Beverage Services, and Accommodation
| Type of Service | GST Rate |
| Food and beverage services provided by non-air-conditioned restaurants | 5% |
| Food and beverage services provided by air-conditioned restaurants | 18% |
| Food and beverage services provided by restaurants serving alcoholic beverages | 18% |
| Outdoor catering services | 5% |
| Accommodation services provided by hotels where the room tariff exceeds Rs. 7,500 per night | 28% |
| Accommodation services provided by hotels where the room tariff does not exceed Rs. 7,500 per night | 12% |
Future of GST on Restaurant Industry
The future of GST in the food and restaurant industry is bright. GST has simplified the tax compliance process, reduced the overall tax burden, and made food and restaurant services more affordable for consumers. The food and restaurant sector is expected to continue to grow in the coming years, and GST will play a key role in facilitating this growth.
Here are some specific ways in which GST is expected to benefit the food and restaurant industry in the future:
- GST will help to boost the formalization of the food and restaurant sector.
- GST will help to reduce the incidence of tax evasion and fraud.
- GST will help to promote inter-state trade in food and restaurant services.
- GST will help to make the food and restaurant sector more competitive globally.
Overall, GST is a positive development for the food and restaurant industry. GST is expected to help the sector grow and thrive in the coming years.
FAQs on GST on Food
The GST on accommodation food and beverage services depends on the type of establishment and the services provided. For example, non-air-conditioned restaurants are subject to a GST rate of 5%, while air-conditioned restaurants are subject to a GST rate of 18%. Restaurants serving alcoholic beverages are also subject to a GST rate of 18%.
The GST rate for accommodation services depends on the room tariff. Accommodation services provided by hotels where the room tariff exceeds Rs. 7,500 per night are subject to a GST rate of 28%. Accommodation services provided by hotels where the room tariff does not exceed Rs. 7,500 per night are subject to a GST rate of 12%.
The GST code for food and beverage is 0901.
Yes, restaurants can charge 5% GST if they are non-air-conditioned and do not serve alcoholic beverages.
The highest rate of GST that is applicable on the food segment is 18%. This rate is applicable to processed food items, ready-to-eat food items, and food items served by air-conditioned restaurants.
Yes, there are some food items that are subject to a nil rate of GST. These items include fresh and frozen food items, such as fruits, vegetables, meat, and fish. Additionally, certain basic food items, such as rice, wheat, and flour, are also subject to a nil rate of GST.
Food items that are explicitly exempted from the Goods and Services Tax (GST) cannot be subsequently taxed. Once a food item is categorized as exempt or non-GST, it should not be subject to any GST charges in the future.
Chocolate and cocoa products are subject to a GST rate. However, the exact rate can vary depending on the specific product and its ingredients. It is recommended to check the latest GST rate schedule or consult with tax authorities for the most up-to-date information on GST rates for chocolate and cocoa products.
Eggs not in their shell or egg yolks that have been boiled or cooked by steaming typically fall under the GST exemption or a nil tax rate. These items are often considered basic food products, and as such, they are not subject to GST in many countries. Nevertheless, it's advisable to verify the current tax rates in your specific region, as they may have changed since my last knowledge update in January 2022.
Food grains are typically exempt from GST or subject to a minimal rate in many countries. Governments often provide this exemption to ensure that essential food items remain affordable for consumers. However, specific GST rates on food grains can vary from one jurisdiction to another. It is advisable to consult the latest GST regulations or your local tax authority to determine the exact GST treatment of food grains in your area.
The tax treatment of takeaway food under GST can vary by jurisdiction and the nature of the food being provided. In some cases, takeaway food may be subject to GST, while in others, it may be exempt or taxed at a reduced rate. The applicability of GST on takeaway food depends on the specific tax laws and regulations in your region. It is recommended to consult your local tax authority or refer to the latest GST guidelines to understand the tax treatment of takeaway food in your area. What is the GST on accommodation, food and beverage services?
What is the GST rate for accommodation services?
What is the GST code for food and beverage?
Can restaurants charge 5% GST?
What is the highest rate of GST that is applicable on the food segment?
Are there any food items with nil charge of GST?
Can food items free of GST charge be subsequently taxed?
What is the rate of GST applicable on chocolate and cocoa products?
What is the rate of taxation on eggs not in shell/egg yolks boiled or cooked by steaming?
Whether GST is applicable on food grains?
Is there GST on takeaway food?
