GST on Restaurant Food: GST on Food Items and How to Spot Overcharges
A Reddit user sparked a debate among netizens and finance experts after being charged a hefty 18% GST on his restaurant bill. The viral post claimed that it should be 5% GST, it seems they are away from the truth. Some netizens also claimed the restaurants are taking advantage of complex GST rules and filing their pocket on the pretext of tax. To end this debate, and share trustworthy information, here we are with a blog unfolding a detailed explanation of GST on restaurant food.
What is the GST Rate on Food Items in Restaurants
If you are starting a new restaurant business or a regular restaurant goer, it is essential to understand how GST is levied on food items in restaurants. Since the introduction of GST in India, the service tax and VAT have been replaced with multi-slab GST rates. Based on a restaurant’s facilities and menu items, GST rates of 5%, 12%, or 18% apply. After collecting these taxes from customers, restaurants must file returns and remit the collected GST to the government.
Some relaxations are given to small scale restaurants, having annual aggregate turnover of less than Rs. 1.5 crores can opt for Composition Scheme under GST and pay a fixed tax percentage.
Regular restaurant businesses can also claim Input Tax Credit (ITC) on inward supplies, rent, and utilities. However, this facility is open to a particular category of restaurants.
GST on Food Items: Spot Overcharging
Check out the GST rate of each of the food items listed below and compare the same with your restaurant bill to know if you have been overcharged on the pretext of GST:
| GST Rate | Particulars |
|---|---|
| Nil | Frozen vegetables |
| Nil | Fresh or chilled vegetables |
| Nil | Dried leguminous vegetables (non-labelled) |
| Nil | Fresh or dried coconuts, grapes, pears, apples, bananas, and others |
| Nil | Fruits like berries, mangoes, pears, grapes, and other citrus fruits |
| Nil | Rice (non-pre-packed or labelled) |
| Nil | Wheat or meslin (non-branded) |
| Nil | Birds’ eggs in shell |
| Nil | Fresh or chilled meat or fish |
| Nil | Fresh milk, pasteurized milk (excluding UHT milk) and cream (neither concentrated nor contains added sugar) |
| Nil | Curd, Lassi, Buttermilk (non-labelled or pre-packed) |
| 5% | Dried vegetables (packed or labelled) |
| 5% | Dried leguminous vegetables (packed or labelled) |
| 5% | Concentrated milk cream or contains added sugar |
| 5% | Curd, Lassi, Buttermilk that is labelled or pre-packed |
| 5% | Yoghurt and cream containing added sugar and is pre-packed irrespective of added flavour |
| 5% | Packed meat |
| 5% | Birds’ eggs (not in shell) |
| 5% | Rice (pre-packed or branded) |
| 5% | Rye (pre-packed or branded) |
| 5% | Cereal flour (Other than wheat, meslin or rye, pre-packed and labelled) |
| 18% | Chocolate and food preparations |
Positive Effect of GST on Food in Restaurants
In this section, we will discuss how GST has positively impacted the restaurant food industry in India; before that, let’s understand the pre-GST taxation on restaurants:
In pre-GST India, there used to be three taxes applicable on restaurant food; which were Service Tax, Service Charge, and VAT. These taxes were over and above the food price..
Lesser Applicable Tax
Before GST, customers as well as restaurant owners had to cope with three different taxes. Now GST has replaced all of them and combined them into a single tax system. It led to a decrease in overall cost of eating in restaurants.
Encouraging Exemptions
Most of the fresh and frozen food items are exempted from GST. For example, vegetables, fruits and meat. This is not only beneficial from a consumer perspective, but also encourages restaurant business throughout the country. However, branded or packaged food comes under the purview of GST but they are taxed not more than 18%, which is also encouraging for small and medium restaurants.
Ensuring Affordability
GST on food items are categorized in lower slabs .i.e 5% and 12%. The intent behind keeping it like this is to ensure affordability, since food is one of the basic necessities. At max, it goes to 18% in certain categories where it is considered as a luxury. In this category food items such chocolate falls which are not consumed by the consumer on a daily basis.
Read More: Latest GST Rates in India
Summing Up
Whether you are a restaurant business owner or a regular restaurant goer, we hope we have added some value to your knowledge with this blog. So this was all about GST on restaurant food. If you are a restaurant or any business owner struggling to keep your accounts up-to-date, here is the solution. Munim Accounting and Billing software has everything you need to keep your books of accounts organized and maintain them effortlessly. Additionally, you get a 14-day risk-free trial without any terms and conditions. Sign up now and experience the Munim Magic.
Frequently Asked Questions on GST Levied on Restaurant Food
1. How much is the GST on restaurant food?
A restaurant may charge either 5% or 18%, depending on where it is located. Here is the full explanation:
| GST % | Particulars |
|---|---|
| 5% | If a restaurant is established as a standalone entity |
| 18% | If a restaurant is located within the premises of a hotel; where room tariff per night is equal to or more than Rs. 7500. |
2. Is there GST on food in restaurants?
Yes, GST is applicable to food in restaurants.
3. Can restaurants charge GST on service charges?
Restaurants or eateries can levy service charges and GST tax. However, customers can decline to pay service charges and so is the GST applicable on it.
4. Can restaurants charge GST on mineral water?
Yes, restaurants can charge 18% GST on packaged mineral water.
5. Can we claim GST on restaurant bills?
As a Customer:
The Section 17(5) of the CGST Act, 2017 disallows ITC claims on GST paid on food and beverages consumed in restaurants, because it is considered as personal consumption.
As a Restaurant Owner:
If your restaurant levies 18% GST and is registered under GST as regular business then you are eligible to claim ITC on input supplies.
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