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

The introduction of Goods and Services Tax (GST) in 2017 brought significant changes to the Indian taxation system, especially in sectors like food and hospitality. For restaurant owners, food delivery services, and consumers, understanding how GST applies to food items and dining services is essential for managing costs, staying compliant, and making informed decisions.

In this blog, we will break down GST rates applicable to different types of restaurants and food items, highlight key rules, and explain how the tax is levied across dine-in, takeaway and online delivery services. Read on!

Understanding GST on Food and Restaurants

GST is a unified indirect tax that has replaced previous taxes like VAT, service tax, and excise duty. It is levied on the supply of goods and services, including restaurant services and packaged food.

The GST council has set different tax rates for food and restaurant services, depending on the type of service, establishment, and the nature of the food product.

GST Rates on Restaurants and Food Services

GST on Food Delivery Services

Post January 2022, platforms like Swiggy and Zomato are required to collect GST directly from customers on behalf of the restaurants:

• GST rate: 5%
• ITC: Not Applicable
• This eliminates confusion where both the restaurant and the platform could charge GST.

GST on Packaged and Processed Food

Different food items fall under different GST slabs depending on how they are packed, processed, and branded.

GST Rules and Compliance for Restaurants

The restaurant business must comply with several GST norms:

1. GST Registration: Mandatory for restaurants with aggregate turnover over ₹20 Lakh (₹10 Lakh in special category states).
2. Composition Scheme: Small restaurants up to ₹1.5 crore can opt for this, paying 5% GST with quarterly returns.
3. Billing and Invoicing: Restaurants must issue proper GST-compliant bills if registered.

Input Tax Credit – What Changed?

Earlier, restaurants could claim input tax credit on raw materials and services. Post-November 2017, restaurants (except those in large hotels) are under the 5% GST slab without ITC, increasing their overall input cost burden.

How GST Impacts Consumers

• Uniform Pricing: GST removed multiple taxes, leading to more transparent billing.
• Delivery Charges: GST applies on the total order value, including delivery and packaging charges.
• Double Taxation Removed: Service tax and VAT are subsumed under one GST rate, simplifying the overall tax structure.

Key Points to Remember

• 5% GST is the standard for most restaurant services, but ITC is not allowed.
• Packaged and processed food items attract higher GST rates.
• Online platforms now collect and remit GST, not the restaurants.
• Small restaurant owners can benefit from the Composition Scheme to reduce compliance burden.

To Conclude

Understanding GST rules on food and restaurants is important for both business owners and customers. While GST has streamlined the indirect tax structure, it is crucial to be aware of which categories apply to your business or dining experience.

Whether you are running a food truck, a fine-dine restaurant, or ordering food online, knowing the applicable GST rate helps in better planning and transparent billing.

Frequently Asked Questions

1. Do I pay GST when ordering food online?

Yes. GST at 5% is collected by the aggregator and remitted to the government.

2. What is Input Tax Credit (ITC)?

Input Tax Credit (ITC) refers to the credit that a business can claim for the GST paid on purchases or expenses used to provide taxable goods or services. In simple terms, ITC allows you to reduce the tax you pay on your output (sales) by the amount of GST you have already paid on inputs (purchases).

3. Can restaurants claim input tax credit?

Only those charging 18% GST (e.g. hotel restaurants or caterers) can claim ITC.

4. Is GST applicable to home tiffin services?

If the provider is not registered under GST and the turnover is below the limit, GST may not apply.

5. What if the restaurant charges both GST and service charge?

GST is a government tax. Service charge is optional and retained by the restaurant.