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TAXAJ Corporate Services LLP - Financial Doctors

GST on Food Business Industry

We help you understand all about GST on food items, GST on restaurants, and how a restaurant bill will look under GST. We also explain the different GST rates applicable on foods in hotels vs. the GST rate on foods in standalone restaurants. Lastly, find out the implications of GST on the end consumers, the owners, and the overall industry.

According to the National Restaurant Association of India’s 2019 India Food Service Report, the size of the Indian food service industry was 1,48,353 crore in 2018-19 and is projected to grow to Rs 2,57,907 crore in 2022-2023 with a CAGR of 15%. 

This growth is further fuelled by the growth of the great Indian middle class. Rapid urbanisation, growing awareness of western lifestyles, more women joining the workforce, and higher disposable income were some of the factors that contributed to the growth of the restaurant industry. As a result, we find ourselves waiting in queues in most of the restaurants during the weekend.

GST on food items in India can be 5%, 12%, or 18% based on factors such as the establishment type and location of restaurants or food service providers among others. Goods and services tax has replaced the VAT and Service tax regime on food services. However, the point to note here is the service charge by restaurants is separate from GST.

Alcoholic beverages have applicable Value Added Tax, 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; however, VAT will be charged on alcoholic beverages served. 

GST on food items is applicable to the purchase of items by the common man which currently features rates ranging from nil to 18% GST.

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About This Plan

Filing of Compliances for the Food business such as restaurant or outlets.

Created by potrace 1.15, written by Peter Selinger 2001-2017


Depends upon case to case basis

Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Filing of Compliances for the Food business such as restaurant or outlets.
Who Should Buy
  • Business or Individual planning to set up and do food business in India
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Share the details as requested
    • Preparation of Books & Taking Care of Compliances
Documents Required
To be discussed on case to case basis.

Understanding a Pre-GST Restaurant Bill

As an end consumer, we hardly pay attention to our food bill in these restaurants and most of us are not even aware of the components included in it. If you revisit your food bill from the pre-GST fine-dine experience, you’ll find Service Tax, Service Charge, VAT being added over and above the food value. 

First, let us understand the components of the bill:

  • VAT: This is the tax charged on the food portion of your bill.
  • Service tax: This is the tax charged on the services provided by the restaurant. [To avoid unnecessary complications, the government had already bifurcated the service portion and food portion and charged taxes accordingly.]
  • Service Charge: This is a charge applied by the restaurants and not by the government. THIS IS NOT A TAX. It should not be confused with service tax as this is an income to the hotels. Service tax is not an income and merely a tax collected from you and submitted to the government.

However, the rates under GST are vastly different from what you would find before the tax policy change. Let us look at these changed rules.

GST Rules for Restaurants

Under GST, restaurants fall under the 5% GST rate, with no option to claim input tax credit (ITC) or the 18% GST rate, with ITC claims. This rate is decided depending on the location of the restaurant. For instance, a higher GST rate would be applicable for restaurants located within hotels where the room tariff exceeds the specified amount.

In the tables below, we decode the GST rates applicable on food, catering, and restaurant services.

GST Rate on Restaurant Services

Sl No.Type of Restaurants GST Rate
 1Food supplied or catering services by Indian Railways/IRCTC5% without ITC
2 Standalone restaurants, including takeaway5% without ITC
 3Standalone outdoor catering services or food delivery service5% without ITC
4 Restaurants within hotels (Where room tariff is less than Rs 7,500)5% without ITC
 5Normal/composite outdoor catering within hotels (Where room tariff is less than Rs 7,500)5% without ITC
 6Restaurants within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC
 7Normal/composite outdoor catering within hotels* (Where room tariff is more than or equal to Rs 7,500)18% with ITC

GST Rate on Food Items

1. Containerized veggies (steamed, uncooked, or boiled) have no GST.

2. Vegetables preserved with brine or other methods that are unfit for immediate human consumption are exempt from GST.

3. Meat packed in a container with a registered trademark/brand name is subject to a 5% GST.

4. 5% GST on non-in-shell avian eggs and egg yolks boiled or steam-cooked.

5. GST is 5% on ginger (excluding fresh ginger), turmeric (except fresh turmeric), thyme, curry leaves, bay leaves, and other herbs and spices.

6. 5% GST on dried leguminous vegetables (skinned/split or not) packed in containers with a registered brand name (skinned/split or not)

7. 12% GST on sugar-preserved vegetables, fruits, nuts, and edible plant parts

8. Foods such as meal/powder of dried leguminous vegetables are subject to a 5% GST.

9. 12% GST on the vinegar/acetic acid, preserved/prepared vegetables, fruits, nuts, and edible plant components.

10. 18% GST on food preparations containing less than 40% cocoa by weight, such as those made with flour, malt extract, and so on.

ParticularsGST Rate
GST on fresh and/or chilled vegetablesNil
GST on frozen vegetablesNil
GST on dried vegetables that are packaged and labelled5%
GST on dried leguminous vegetables other than pre-packaged and labelledNil
GST on dried leguminous vegetables that are pre-packaged and labelled5%
GST on fresh/dried coconuts, grapes, apples, bananas, and pears, among othersNil
GST on fruits like grapes, apples, bananas, pears, mangoes, citrus fruits, and berries, among othersNil
GST on vegetables, fruits, nuts, and edible plant parts that are preserved using sugar12%
GST on fruits, nuts, and edible plant parts that are preserved and/or prepared using vinegar and/or acetic acid.12%
GST on fresh milk, pasteurised milk (excluding UHT milk), and milk and cream (not concentrated nor contains added sugar or sweeteners)Nil
GST on milk and cream that is concentrated or contains added sugar or sweeteners5%
GST on curd, lassi, and buttermilk, other than pre-packaged and pre-labelledNil
GST on curd, lassi, and buttermilk that is pre-packaged and pre-labelled5%
GST on yoghurt and cream, whether containing sugar/flavouring or not5%
GST on fresh or chilled meat and fishNil
GST on meat that is packaged and labelled5%
GST on birds’ eggs in shellsNil
GST on birds’ eggs which are not in a shell5%
GST on rice other than pre-packaged and labelledNil
GST on rice, pre-packaged and labelled5%
GST on wheat or meslin (i.e. maize flour) other than pre-packaged or labelledNil
GST on wheat or meslin, pre-packaged and labelled5%
GST on rye other than pre-packaged and labelledNil
GST on rye, pre-packaged and labelled5%
GST on cereal flours other than of wheat or meslin, rye, etc., pre-packaged and labelled.5%
GST on chocolate and food preparations containing cocoa18%

Effect of GST on Restaurant and Food Items

After the inception of GST, a simplification of the bill was witnessed by those eating out at restaurants, as restaurant GST rate replaced multiple taxes and cesses such as VAT, Service Tax, and Krishi Kalyan cess to name a few. 

Furthermore, a decrease in the effective tax on restaurant bills was also evident to customers after GST implementation. But the decrease in the cost for those who are eating out was observed to be marginal at best. However, the service charge has not been affected by GST and is still applied by the restaurant.

For restaurant owners, the Input Tax credit or ITC was expected to increase the working capital availability for restaurants after the implementation of GST. On the contrary, The introduction of GST brought with it the removal of the Input Tax Credit or the ITC. This implies that the GST they paid on raw materials and rent could not be claimed. 

Later, certain 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.

As mentioned in the table above, in terms of food GST rate items including vegetables, fruits, meat, etc., nil GST i.e. GST exemption has been provided in case of most fresh as well as frozen products. The only packed food in containers with a trademark/brand name has GST rates applicable to them. As of now, GST on food items or food services is not charged more than 18% and no food items are as of yet featured in the highest tax bracket of 28%. Thus, no major price fluctuations have been reported after the implementation of GST on food items.


To be honest, it is an interesting mixture of tangible results to be seen and felt in the coming months (some of which is already playing out in the industry):

Industry stakeholders i.e. the restaurant and fast-food joint owners stand to gain the most in this scenario as it now becomes possible to claim input tax credit (ITC) on the on goods and services consumed while providing services. More has been elaborated about this effect here. In place of multiple governmental and restaurant-imposed taxes, lies a unified tax form that is simply split as CGST (tax that goes to the Centre) and SGST (tax that goes to the State), so this makes it simple for both businesses and consumers, both in terms of calculation and comprehension, respectively.

There however, remains a lot of be understood in the context of taxing diners. For one, service charge still makes its way in with some of the food bills and consumers are perplexed as to why all the taxes are not falling under a single head as was promised. Some restaurants continue to levy service charge as part of their “management policy” rendering it a mandatory touch, while others have desisted from levying the same on various grounds – one reason being GST exemption applicable on certain ingredients like food grains, fresh fish, chicken and mutton, etc. For those who continue to impose the charge on the customers, fresh clarity has come about in the sense that only recently, Food and Consumer Affairs Minister Shri Ram Vilas Paswan echoed that service charges in restaurants were by no means voluntary, and were purely discretionary, to be decided by the consumer. This comes about as a slight respite to customers who can file a consumer complaint against this sort of unfair trade practice in the relevant forum if they find service charge mandatorily charged on their food bills.

To make it easier for customers to understand and businesses to maintain transparency, recently, the government issued guidelines in this regard, where it has been categorically stated that product prices (in this case the menu card in restaurants and cafes) should cover both the goods and service components, since ideally, the customer agrees to pay prices that appear on the menu and relevant applicable taxes only, not any other charge over and above that. To delineate this discretionary feature of potential food bills, restaurants may now specify that service charge is voluntary and leave a column blank for the customer to fill in before making any payment. This way, restaurant and café owners are compelled to follow the law and not overcharge customers in the name of “governmental taxes” whereas customers are saved from being repeatedly swindled.

Whether or not this will bear the desired fruits is yet to be seen, nevertheless, it is a safeguard against haphazard and whimsical pricing structures followed by most businesses in the food and dining business.

Logically speaking, the first point of the aforementioned guidelines is in tune with the concept of input tax credit (that can now be claimed), which is more likely to reduce overall prices in the long run, benefiting both businesses and consumers. So ideally, there remains no reason why consumers should be overburdened now, when in fact, they should be receiving the benefits passed on from the taxes saved by businesses in the food industry.

In this context, it may be said that a lot of transparency has come about in how food bills shall now be calculated. So, if a restaurant owner thinks can restaurant charge gst from customers, now you got the answer from the above statement.

That said, many restaurants immediately hiked their prices with effect to the GST roll-out, knowing fully well that prices would likely come down. In these cases, consumers obviously ended up paying just as much. Whereas there are also many others, who are waiting to see the full effects of the new tax regime and get a balanced picture of their costs and benefits, before hiking/stabilising prices. Quite naturally, the current economic scenario against the GST backdrop seems to be undergoing a massive transition phase, one that will take considerable time and consistent effort on the part of industry stakeholders, to be levelled out where everybody wins a piece of the GST slice. To be blunt, a lot in this industry depends on the wait-and-watch policy; as of now GST compliance and an understanding of all its subtle nuances is paramount and the only way forward to adapting to the new tax structure seamlessly.