New
January 25, 2023
By
Shreeja Ray

Impact of GST on Food and Restaurants

Based on variables including the institution type and location of restaurants or food service providers, among others, GST on food items in India can range from 5% to 18%. The VAT and service tax framework for food services has been replaced by the goods and services tax. The important thing to remember is that the service fee charged by restaurants is not included in the GST.

Restaurants that serve both food and alcoholic beverages will levy different taxes, with GST being applied to food and non-alcoholic beverages while VAT will be charged on alcoholic beverages supplied. Alcoholic beverages are subject to the applicable Value Added Tax, which is a state-level tax.

The common man must pay GST on food goods, with rates now ranging from nil to 18% GST, while purchasing items.

Understanding pre-GST restaurant bills

As customers, we hardly ever pay attention to the food bill at these establishments, and the majority of us aren't even aware of the ingredients that are included. If you go back and look at your meal bill from the fine-dining experience before the GST, you'll see that Service Tax, Service Charge, and VAT have been added on top of the worth of the food.

Let's first examine the elements of the bill:

VAT: This is the tax that is added to the cost of your food.

Service tax: It is the levy placed on the services the establishment renders. [The government has already divided the service portion and food portion and charged taxes accordingly to avoid needless problems.]

Service Fee: This is a fee that eateries impose, not the government. As this is a source of revenue for the hotels, it should not be confused with service tax. Service tax is only a tax that is taken from you and paid to the government; it is not considered income.

The rates under GST, however, are significantly different from what you would have found prior to the change in tax law. Let's examine these modified rates below.

GST Rules for Restaurants

Restaurants are subject to either a 5% GST rate under the GST with no possibility to claim input tax credits (ITCs) or an 18% GST rate with claims for ITCs. The location of the establishment will determine this rate. For instance, where the room fee surpasses the predetermined amount, a higher GST rate would be imposed for restaurants housed within hotels.

GST Rate on Food items in India

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.

Questions and Answers (FAQs)

What is the highest GST rate that the food industry is subject to?

The food industry has a maximum GST rate of 28%, which is applicable to some products such as carbonated and caffeinated beverages.

Do any foods have a GST fee that is zero?

Yes, there are food items that are subject to the GST at 0%, including fresh fruits, vegetables, meat, and fish.

What is the GST rate for items containing chocolate and cocoa?

Chocolate and cocoa products are subject to an 18% GST rate.

Does GST apply to takeout food?

Yes, takeout food is subject to the GST. Depending on where the eatery is, the rate is either 5% or 18%.

Conclusion

The majority of fresh and frozen products are GST-exempt when it comes to food items like meat, vegetables, fruits, and so on. Only food items in brand-named containers are subject to other GST rates. The GST on food products or services is currently limited to 18%, and no food products fall into the 28% maximum tax bracket. As a result, since the introduction of GST, no discernible price hikes or decreases in food products have been noted (Goods and Service Tax).

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Read More: GST Council Meeting Highlights , GST Filing , GST Payment Process and Refunds 

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