GST On Food
Goods and Services Tax on food services in India can be 5%, 12% or 18% based on a variety of factors including but not limited to the establishment type and location of restaurants or food service provider. VAT and Service tax regime replaced by GST on food services. But one needs to understand that the service charge which is implemented by restaurants is separate from GST.
Alcoholic beverages attract VAT, 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 while VAT will be charged on alcoholic beverages served.
GST on food also applies to the purchase of food items by the common man which currently feature rates ranging from nil to 18% GST.
Key rates applicable to GST on food services and products
- 5% GST on food services given by restaurants (both air-conditioned and non a/c).
- 5% GST on restaurant services which include 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 the office, industrial unit, school, college, hostel, etc.
- 5% GST on meals/food services given by Indian Railways/IRCTC or their licensees both on board trains and on platforms.
- 18% GST on restaurant services including room service and takeaway provided by restaurants located within a hotel featuring room tariffs 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.
GST on food items
- 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.
Impact of GST on food
GST on food is nothing but a simplification of the bill; it replaced various taxes and Cess such as VAT, Krishi Kalyan Cess, Service, etc. After the implementation of GST on food, a decrease in the effective tax on restaurant bills are also evident to customers. But the decrease in the cost of eating out for customers was also observed to be marginal at the best.
No change has been witnessed in the service charge as it is still payable by the customer in addition to GST on food in the restaurants.
For restaurant owners, the availability of Input tax credit after GST implementation was expected to make an increase in the working capital availability for restaurants.
Under the provision of GST rules, ITC benefit is available only to those charging 18% of GST, while restaurants or eateries are charging only 5% GST on food services does not receive ITC benefits.
At present, GST on food items or food services do not exceed 18% and no food items are featured in the highest tax bracket of 28%. As a result, no major price hikes/decreases have been reported after the implementation of GST on food items.
