A business must register for GST if its annual revenue reaches ₹ 40 lakhs, or ₹ 10 lakhs in northeastern and hill states. The Goods and Service Tax, an indirect tax, replaces sales tax, value-added tax, excise duty, and other taxes.
GST reduces tax evasion and aids in maintaining tax compliance. Each state's government will be able to create and implement programmes that will benefit the populace as a result of firms registering for GST in that state.
GST is levied on the supply of goods and services, including food services and restaurants. It is a multi-stage, destination-based tax that is levied upon value addition. This single domestic indirect tax is applicable across the entire country.
The Goods and Services tax on food is divided into the following elements:
All goods and services are taxed as per this tax structure. It is inclusive of the food services and restaurant business.
GST has various benefits that could contribute to the country's economic growth and ease the way of business. Here’s a list of benefits of GST Registration Process:
The GST on food services is subdivided into the following slab rates:
These are based on different factors, including the establishment type and the restaurant's location. The service charge implemented by the restaurant is different from GST. In the case of alcoholic beverages, VAT is applicable, which is a state-level tax.
So, if a restaurant serves alcoholic beverages and food, there will be separate taxes with GST applicable to food and non-alcoholic drinks. At the same time, VAT will apply to alcoholic beverages.
As we have discussed above, the GST on food falls under three different tax slabs 5%, 12%, and 18%. Here, we are enumerating the details of the same:
Similar to restaurant services, any food product also falls under certain tax slabs. This is highlighted below:
|GST Rate||Product Type|
|NIL||Packaged food, both cooked and uncooked|
|5%||Packaged meat with a brand name or trademark|
|5%||Packaged leguminous food having a brand name or trademark|
|5%||Dry ginger, dry turmeric, bay leaves, curry leaves, thyme, and more|
|12%||Nuts, fruits, and edible plant parts|
|12%||Fruits and vegetables preserved in vinegar|
|18%||Malt extract and flour with less than 40% cocoa powder|
At present, none of the food services or items fall under the slab of 28%. There is no GST on fresh fruits, meat, and vegetables. Only packaged containers with brand names or trademarks fall under the GST tax slab. The maximum GST on food and restaurant services is 18%.
Several taxes, including the VAT, Krishi Kalyan cess, cess for services, and other taxes, have been replaced by the GST on food. The effective tax on a restaurant bill has decreased due to the implementation of GST. Although the GST system has greatly simplified the complexity of the various taxes, the service fees that diners continue to pay in restaurants have not been significantly affected.
The Input Tax Credit, or ITC, the benefit is only available to services that charge an 18% GST, by GST provisions. However, a restaurant that charges 5% GST on food services is not eligible for ITC.
Apart from 5-star hotels and restaurants, no food items or services currently fall under the 28% threshold. As a result, there has been no significant price increase following implementing of GST on food items.
It was anticipated that introducing ITC would increase the availability of working capital for restaurants after implementing GST. Later, changes were made that reduced the ITC benefit for restaurant owners. However, under current GST rules, the ITC benefit is only available to restaurants that charge 18% GST.
Our intellectual lawyers and company secretaries in India will help you set up the GST registration for your food business, you need to submit the required documents, and we will take care of all the paperwork. You don’t have to worry about the registration process. Our team will be in touch with you the entire time, and they will clarify all your doubts. Our team is competent in terms of legal expertise, and compliance. You can always get in touch with our experts to learn more about food licenses and other topics.