GST on Food and Restaurants in India – Rates, Rules & How It Applies

GST on food and restaurant services affects restaurants, food delivery services, and customers across  India. The GST Council of India introduced a unified indirect tax system that combines multiple taxes such as VAT, service tax, and excise duty. Thus, understanding GST rates and compliance requirements helps businesses control costs effectively while remaining compliant with the tax laws.

What is GST on Food and Restaurants?

Goods and Services Tax (GST) is an indirect tax charged on providing goods and services; this includes meals made in restaurants and packaged food products. The GST rate on food varies by the type of food, type of restaurant or establishment and whether the food was eaten at the establishment or delivered.

Structurally speaking, GST is applicable to eating, providing a food delivery service and selling packaged or processed food through the retail trade. Each of these categories has its own GST rate and provisions for obtaining input tax credit (ITC).

How Do GST Rates Differ Across Restaurant Establishment Types

Restaurants pay different GST rates based on their type and where they are located. The table below shows the GST that applies to restaurant services for the main types of establishments:

What is GST on Food Delivery Services?

Since January 2022, online food delivery services like Swiggy and Zomato have collected and paid GST for restaurant orders. According to CBIC, operators now have to handle the GST for meals ordered through their platforms. Under Section 9(5) of CGST Act, aggregators are treated as the supplier for GST purposes.

The 5% GST on food delivery orders, including GST on takeaway, is levied on the total order value, including delivery and packaging charges. Consumers pay this GST directly to the food aggregator platform at the time of checkout.

What is the Food GST Rate on Packaged and Processed Food?

The GST rate on packaged food depends on the way it is packed, processed and branded. A clear breakdown of applicable food GST rates is provided in the table below.

What are the GST Rules and Compliance that Restaurant Owners Should Know? 

Restaurant businesses have to comply with various regulations relating to GST on restaurant services. The main requirements are summarised as follows:

GST Registration Threshold

Restaurants with an annual turnover of more than ₹20 Lakh need to register under GST. The threshold for special category states is ₹10 Lakh. Businesses exceeding the prescribed turnover threshold are required to register on the GST portal.

Composition Scheme for Small Restaurants

GST Composition Scheme is available for restaurant owners with an annual turnover of up to ₹1.5 Crore. The simplified rate of 5% GST on restaurants, under the 5 GST slab and typically applicable without ITC, along with quarterly return filing, eases the compliance burden considerably for smaller restaurants.

Billing and Invoicing Requirements

All GST-registered restaurants have to provide GST-compliant bills reflecting the GST restaurant rate, GST registration number and total GST charged, and any separate service charge, if levied by the restaurant, should be shown clearly as it may be distinct from GST. Failure to comply attracts penalties under the GST Act.

Read Also: Impact of GST on Business Loan Interest & Its Processing Fee

How Does GST on Food Impact Consumers? 

An understanding of GST on food helps consumers read restaurant bills accurately and know the taxes applicable to food purchases and food delivery orders. The GST on restaurant services subsumed several taxes, including VAT and service tax, and improved billing transparency. 

Now, consumers see one GST rate for food, instead of multiple line items of taxes on their bill. When ordering food online, GST is applied to the total value of the order, including delivery and packaging charges.

GST replaced numerous indirect taxes like VAT and service tax and made the taxation system for restaurant services more simplified and transparent.

Key Points to Remember About GST on Food

The following table highlights the key GST rules applicable to food, restaurant services, and food delivery in India.

These provisions offer a quick overview of the applicable GST rates and compliance requirements for businesses and consumers.

To Conclude

GST has streamlined the taxation of food and restaurant services by replacing multiple indirect taxes with a unified framework. Whether it applies to restaurant dining, food delivery, or packaged food products, understanding the relevant GST rates and compliance requirements helps businesses manage operations efficiently. It also promotes greater transparency in taxation for consumers.

FAQs

What is the restaurant GST rate for a standalone dine-in restaurant in India?

Independent restaurants pay 5% GST at the general rate for restaurants. While dining spaces within hotels attract 18% and ITC only when the room tariff is ₹7,500 or above, GST rates on standalone outlets in restaurants in India remain at 5%.

What is the GST applicable when ordering through Swiggy or Zomato?

As of January 2022, the GST rate on food orders through aggregator platforms is 5% on the total order value, inclusive of delivery and packaging charges, and this tax is paid to the government.

What is the food GST rate on packaged snacks or frozen food?

GST on packaged snacks is usually between 12% and 18%, depending on the product category. For example, chocolates attract 18% GST while ready-to-cook frozen foods are generally covered under the 12% slab.

Can small restaurant owners reduce their GST compliance burden?

Yes. The Composition Scheme is available to restaurants with an annual turnover up to ₹1.5 Crore to pay a simplified restaurant GST rate of 5% and file returns quarterly.

Does GST on restaurant services apply to home tiffin services?

If the annual turnover is less than ₹20 Lakh and the business is unregistered, then GST on restaurant services is not required. However, if you cross that income level, you have to register, as GST now applies to the services provided by the supplier.