This article presents an impact analysis of GST on the restaurant and food industry, a vital sector of the Indian economy that caters to our palates. It delves into the intricacies of GST on food items and restaurants and sheds light on how GST rates differ for foods in hotels and standalone restaurants. Moreover, it elaborates on how a restaurant bill would appear under GST and what the implications of GST are for end consumers, restaurant owners, and the industry as a whole.
The Indian food service industry has grown significantly, with a size of Rs 1,48,353 crore in 2018-19, as per the National Restaurant Association of India’s 2019 India Food Service Report. It is projected to reach Rs 2,57,907 crore in 2022-2023, with a CAGR of 15%. This growth is fueled by the expanding middle class, urbanisation, changing lifestyles, higher disposable income, and increased participation of women in the workforce. This has led to long queues at most restaurants during weekends.
Understanding a pre-GST Restaurant Bill
Most of us overlook the details of our food bills at restaurants and are usually unaware of the various components that constitute them. In the pre-GST era, we used to see Service Tax, Service Charge, and VAT added on top of the food value.
To avoid unnecessary complications, the government had already segregated the service and food portions and taxed them accordingly. VAT was charged on the food portion of the bill, while Service Tax was charged on the services provided by the restaurant. However, Service Charge was not a government tax but a fee levied by the restaurant for their services.
With the introduction of GST, the tax rates have changed significantly. The new rates vary vastly from what they were before the tax policy change. In this article, we will discuss the new rates and their implications for the restaurant and food industry.
GST Rules for Restaurants
Restaurants are now categorised under the GST tax bracket of either 5% without input tax credit (ITC) or 18% with ITC, based on the establishment’s location. If the restaurant is situated within a hotel whose room tariff is above a certain limit, it falls under the higher GST bracket. This updated tax policy aims to streamline the taxation process for restaurants across India.
GST Rate on Restaurant Services
|S No||Type of Restaurants||GST Rate|
|1||Food supplied or catering services by Indian Railways/IRCTC||5% without ITC|
|2||Standalone restaurants, including takeaway||5% without ITC|
|3||Standalone outdoor catering services or food delivery service||5% without ITC|
|4||Restaurants within hotels(Where room tariff is less than Rs 7,500)||5% without ITC|
|5||Normal/composite outdoor catering within hotels(Where room tariff is less than Rs 7,500)||5% without ITC|
|6||Restaurants within hotels*(Where room tariff is more than or equal to Rs 7,500)||18% with ITC|
|7||Normal/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
|GST on fresh and/or chilled vegetables||Nil|
|GST on frozen vegetables||Nil|
|GST on dried vegetables that are packaged and labelled||5%|
|GST on dried leguminous vegetables other than pre-packaged and labelled||Nil|
|GST on dried leguminous vegetables that are pre-packaged and labelled||5%|
|GST on fresh/dried coconuts, grapes, apples, bananas, and pears, among others||Nil|
|GST on fruits like grapes, apples, bananas, pears, mangoes, citrus fruits, and berries, among others||Nil|
|GST on vegetables, fruits, nuts, and edible plant parts that are preserved using sugar||12%|
|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 sweeteners||5%|
|GST on curd, lassi, and buttermilk, other than pre-packaged and pre-labelled||Nil|
|GST on curd, lassi, and buttermilk that is pre-packaged and pre-labelled||5%|
|GST on yoghurt and cream, whether containing sugar/flavouring or not||5%|
|GST on fresh or chilled meat and fish||Nil|
|GST on meat that is packaged and labelled||5%|
|GST on birds’ eggs in shells||Nil|
|GST on birds’ eggs which are not in a shell||5%|
|GST on rice other than pre-packaged and labelled||Nil|
|GST on rice, pre-packaged and labelled||5%|
|GST on wheat or meslin (i.e. maize flour) other than pre-packaged or labelled||Nil|
|GST on wheat or meslin, pre-packaged and labelled||5%|
|GST on rye other than pre-packaged and labelled||Nil|
|GST on rye, pre-packaged and labelled||5%|
|GST on cereal flours other than of wheat or meslin, rye, etc., pre-packaged and labelled.||5%|
|GST on chocolate and food preparations containing cocoa||18%|