Overview

GST on food and beverages in India can be 5%, 12%, or 18%, depending on factors such as the establishment type and location of restaurants or food service providers, among others. GST has replaced the value-added tax and service tax on food services.

The state government charges an applicable VAT on alcohol. Therefore, the state government will levy separate taxes on restaurants serving both food and alcohol, applying GST to food and non-alcoholic beverages and charging VAT on alcoholic beverages.

Benefits

The introduction of GST has had a powerful impact on the food industry in India. Therefore, the goods and services tax (GST) on some basic food items has ensured that important food items are affordable to all classes of society. It has also affected the cost of processed and packaged foods, restaurant food, and food delivery services.

GST has simplified the tax system, which is one of the positive impacts on the food industry. The GST has replaced some taxes like VAT, service tax, and excise duty, making the tax system easier to understand.

Another positive impact of GST is that it has helped reduce the cascading effect of taxes. The previous tax system was characterized by many taxes at different parts of the supply chain. However, the implementation of the goods and services tax (GST) has reduced the cascading effect of taxes, resulting in a more efficient and smooth tax system.

Procedure

1. GST Rates on Food and Beverages:

• a) Restaurants: 5% GST on non-AC restaurants without input tax credit (ITC).
• b) AC restaurants are subject to 5% GST without ITC.
• c) Restaurants inside hotels (where room tariff is less than ₹7,500 per night): 5% GST without ITC.
• d) Restaurants inside hotels (where room tariff is ₹7,500 or more per night): 18% GST with ITC.
• e) Takeaway/Delivery: 5% GST, without ITC.
• f) Outdoor catering: 18% GST with ITC.
• g) Luxury Dining: 18% GST with ITC.
• h) If food and beverages are included in room service (without a separate bill), the applicable GST rate is included in the room tariff.
• i) If separately billed, it is 5% or 18%, depending on the restaurant classification.

2. GST Registration:

Any restaurant or food and beverage service provider with an annual turnover exceeding ₹20 lakhs must register for GST.

3. Invoicing:

Issue a proper tax invoice that includes the GSTIN and the applicable GST rate. For takeout or delivery services, the invoice must include the delivery address.

4. Input Tax Credit:

Restaurants charging 5% GST cannot claim ITC on inputs. Those who pay 18% GST can claim ITC.

5. Filing GST Returns:

Businesses have to file monthly GST returns, depending on their turnover. This includes GSTR-1, GSTR-3B, and GSTR-9.

6. Compliance:

To avoid discrepancies, regular reconciliation of sales and filed returns is necessary. Maintaining accurate records of purchases, sales, and ITC claims is crucial.

Documents

• 1) Proof of identity and address
• 2) PAN Card
• 3) Aadhaar Card
• 4) Proof of address
• 5) Business registration documents
• 6) Partnership Deed
• 7) Certificate of Incorporation
• 8) Proof of business registration
• 9) Proof of Business Address
• 10) Rent Agreement
• 11) Utility Bill
• 12) Bank Account Proof
• 13) Photographs
• 14) The documents include passport-sized photographs of the owner or partners/directors.
• 15) Authorization Documents
• Digital Signature
• 16) Business Activity Proof

FAQs

1. What is the higher rate of Goods and Services Tax (GST) that is applicable to the food segment?

In the food segment, the highest rate of GST is 28%, which is applicable to certain goods such as caffeinated and carbonated beverages.

2. Is there a GST on takeaway food?

Yes, GST is applicable to takeaway food. The rate is 18%, depending on the restaurant's location.