GST on Food items in 2022 [Tax Rates, HSN Codes]
When the Goods and Services Tax (GST) was implemented in July 2017, the serviceable restaurants were categorised into three categories.
- 12% GST was imposed on restaurants that didn’t have air conditioning.
- 18% GST as applicable for restaurants with air conditioning or license of liquor service/consumption.
- 28% GST was applied for restaurants catering under the five-star hotels.
However, these rates have been simplified over time by the Government. Here are the current tax rates and rules for restaurants with food services:
Type of Restaurants (with services provided) | GST imposed |
Both air-conditioned and Non-air-conditioned restaurants | 5% |
Catering services including room service and takeaway with the rate of the room less than ₹7,500 | 5% |
Non-alcoholic food and drink provided at contract-managed bars/restaurants/clubs in offices, industrial areas, schools, universities, dormitories, etc. | 5% |
Indian Railways/IRCTC meals catering provided by licensees on board and the platform | 5% |
Catering services including room service and takeaway with the rate of the room more than ₹7,500 | 18% |
Catering services including food delivery provided by catering or joint ventures to club premises, guesthouses and more | 18% |
All outdoor food catering services | 18% |
In this post, we will be discussing the GST on food items. But before that, let’s understand the GST imposed on the food items.
GST on Food Items
GST implemented on food items in India ranges from 5%, 12% and 18% when calculated based on different factors. These factors can be the type of categorisation it belongs to and the location of these restaurants and providers.
GST has completely updated the structure of service tax and VAT applicable on food items. However, it should be noted that the service charges of the restaurants are completely different from the GST.
GST applies to food and soft drinks. However, VAT is applied to alcoholic beverages. GST on food items applies to every person buying them, ranging from 0 to 18% GST.
Here are the current GST imposed on food items:
Food items | GST imposed |
Fresh vegetables like potatoes, onions, garlic and leek | - |
Fresh fruits like bananas, apples or pears, etc. | - |
Vegetables packed in a container (either raw, steamed or boiled) | - |
Vegetables stored in saltwater (other means are not suitable for immediate consumption) | - |
Branded/branded containers of meat | 5% |
Shell-less poultry eggs/chawanmushi or steamed chawanmushi | 5% |
Dried beans packed in a registered brand box (whether peeled/split) | 5% |
Ginger (other than fresh ginger), turmeric, bay leaf, curry leaves, etc. | 5% |
Foods such as flour or dry leguminous vegetables | 5% |
Edible parts of vegetables, fruits, nuts and plants preserved with sugar | 12% |
Edible parts of vegetables and fruits, parts of plants preserved/prepared with vinegar and nuts | 12% |
Foods such as flour or foods cooked with malt extract that has less than 40% of its weight | 18% |
Chocolate plus different cocoa-based products | 18% |
Please note that these rates are applicable to change as per the orders imposed by the Government.
Let’s now understand the GST on food items and restaurants.
Also Read: Best Ghee Brands in India
GST on Food Items and Restaurants
This section discusses some significant impacts related to GST on food items, including restaurants and food delivery service in India.
1. Simplified process
- Since the introduction of GST, many other taxes and obligations such as alternative GST tax rates, VAT and taxes on restaurant services have made the customers aware of the simplification of taxes and invoices.
- There are several tax names for Krishi Kalyan. Likewise, after GST was imposed, it became clear that the effective tax on the restaurant would decrease due to the removal of other taxes.
Also Read: Best Mayonnaise Brands in India
2. Input Tax Credit (ITC)
- Input Tax Credit (ITC) after GST was imposed was anticipated to increase restaurants' working capital. However, further changes were made to reduce the benefits of ITC.
- Please note that under the present GST rules, these benefits are only available to restaurants that charge 18% GST.
3. Online Food Delivery
- The restaurant and food delivery industry demanded a reduction in GST on food deliveries from 18% to 5%. This will boost the currently $3 billion segment. As per the insiders’ report, customers who order food to their home/office pay more than 13% tax as compared to customers who go to restaurants for the same food and drinks (because of 5% GST).
- The high 18% GST rate on online food delivery providers and the ineligibility of their GST credits billed to restaurants is negatively impacting the growth of the industry.
Conclusion
There have been strings of improvement highlighted by the critics, which the Government needs to work upon within this sector. Being an essential service, GST should be continuously evolved and amended to promote better growth and development for the food industry.
| We hope our article turned out to be useful for you. For more such informative content, you can visit these linked articles as well: | ||
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| GST on Food items | GST on Real Estate | GST on the logistics sector |
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FAQs on the GST on Food Items in 2022
Here are some important FAQs related to the GST on food items and restaurants in 2022:
Q. How to register for GST?
Ans. To apply for the GST for a new restaurant, you have to fill the GST REG-01 registration form. Go to the GST portal and submit the required documents and other basic details (email, mobile number, PAN, etc.). Such return reports are filed every month or every quarter except for businesses with a turnover of less than ₹1.5 cr.
Q. Is GST applicable on bread and related products?
Ans. No, there is not any GST on bread (branded or non-branded). However, there is a separate range of GST rates applicable on mixes, toasted bread, waffles/wafers, rusks, and pizza. Please note that these rates will not always be fixed. These are bound to be changed as per the statements related to the GST amendment by the Government.
Q. When do I need to register for GST?
Ans. A business with a total sale of more than ₹20 lakhs for any financial year is subject to GST. It includes the sum of all taxable and tax-free transactions, exports of goods/services, and inter-state supplies, etc. However, if the total sales for a business fall below this limit, then the business or individual do not have to pay GST.