Goods and Services Tax on food services in India can be 5%, 12% or 18% depending on a variety of factors including but not limited to type of establishment and location of restaurant/food service provider. The implementation of GST on food services replaced the earlier VAT and service tax regime, however, the service charge which is implemented by restaurants is separate from GST. It is notable that alcoholic beverages still attract VAT, which is a state level tax, therefore restaurants serving both food and alcoholic beverages will feature separate taxes with GST being applicable to food and non-alcoholic beverages while VAT will be charged on alcoholic beverages served. Apart from food services, GST on food is also applicable to food items purchased by the common man which currently feature rates ranging from nil to 18% GST. In the following sections, we will discuss the key rates applicable to GST on food services and products.
GST on Food Services
The following are the key rates applicable to GST on food services*:
- 5% GST on food services provided by restaurants (both air-conditioned and non a/c).
- 5% GST on restaurant services including room service and takeaway provided by restaurants located within a hotel featuring room tariff less than Rs. 7,500.
- 5% GST on any food/drink (non-alcoholic) served at cafeteria/canteen/mess operating on contract basis in office, industrial unit, school, college, hostel, etc.
- 5% GST on meals/food services provided by Indian Railways/IRCTC or their licensees both onboard trains and on platforms.
- 18% GST on restaurant services including room service and takeaway provided by restaurants located within a hotel featuring room tariff over Rs. 7,500.
- 18% GST on food services including delivery of food provided by a restaurant/food joint located within premises of a club, guest house, etc.
- 18% GST applicable to all outdoor catering services provided.
*The list is indicative and rates are subject to periodic change.
GST on Food Items
The following are the key GST rates applicable to some common food items*:
- Nil GST on fresh and chilled vegetables including potatoes, onions, garlic, leek etc.
- NIL GST on non-container packed dried leguminous vegetables(shelled) whether skinned/split or not
- Nil GST on fresh grapes, fresh/dried coconut, fresh/dried bananas/plantain, fresh apples, fresh pears, etc.
- Nil GST on meat (not in container whether fresh or chilled)
- Nil GST on birds’ eggs in shell (fresh/cooked/preserved)
- Nil GST on unsweetened milk (pasteurised/unpasteurised), 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
- 5% GST on meat packed in container bearing registered trademark/brand name
- 5% GST on birds’ eggs not in shell/egg yolks boiled or cooked by steaming
- 5% GST on dried leguminous vegetables packed in container bearing registered brand name (skinned/split or not)
- 5% GST on 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
- 12% GST on vegetables, fruits, nuts and edible plant parts preserved using sugar
- 12% GST on vegetables, fruits, nuts and edible plant parts that are preserved/prepared using vinegar/acetic acid.
- 18% GST on food preparations such as those prepared using flour, malt extract, etc. containing cocoa less than 40% of total weight.
- 18% GST on chocolate and other cocoa products
*The list is indicative and rates are subject to periodic change. For detailed list of GST rates on various food products, use Paisabazaar’s GST Rates and HSN/SAC Code Finder.
Impact of GST on Food
Subsequent to implementation of GST, those eating out at restaurants have witnessed a simplification of bill as GST replaced a multitude of taxes and cess such as VAT, Service Tax and Krishi Kalyan cess to name a few. Subsequent to implementation of GST on food, a decrease in the effective tax on restaurant bills was also evident to customers. But the decrease in the cost of eating out for customers was observed to be marginal at best. What’s more, GST has not affected service charge which is applied by the restaurant, hence this is still payable by the customer in addition to GST on food..
For restaurant owners, the availability of input tax credit (ITC) subsequent to implementation of GST was expected to increase the working capital availability for restaurants. Later, 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.
In terms of GST on food items such as vegetables, fruits, meat, etc., nil GST i.e. GST exemption has been provided in case of of most fresh as well as frozen products. It is only in case of food stuff packed in containers with brand name that other GST rates are applicable. As of yet, GST on food items or food services do not exceed 18% and no food items are as of yet featured in the highest tax bracket of 28%. As a result, no major price hikes/decreases have been reported subsequent to implementation of GST on food items.