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Introduction
GST is the Goods and Service tax that is the new tax regime for indirect taxation. This tax regime was introduced by the government in order to centralize the indirect taxation process and make it common for all the states throughout the country. The previous tax regime had multiple taxes levied on all the products and services in India. These taxes were levied at multiple points of sale or transfer of such goods and services.
Food is one of the many segments where GST is applicable and is liable for charge of indirect tax under GST laws. The details of GST that is levied on food and the associated details regarding the applicability of GST and non applicability of GST are mentioned below.
About GST on Food
GST Rates on Food Products
The GST tax structure has multiple rates of GST applicable to the food segment. The rates of taxation range from 5% to the highest bracket under GST i.e. 28%. Many commodities under the food segment are also exempted from the levy of GST. Majority of staple foods and basic foods are free from taxation under the GST tax regime.
Given below is an inclusive list of some of the items or commodities that are free from the levy of GST under the new indirect tax regime.
- milk, cream, cheese and eggs
- meats for people to eat (except prepared meals or snacks)
- spices and sauces
- rice, cooked or uncooked (but not hot)
- baby food and infant formula
- cooking ingredients such as flour, sugar and cake mixes
- fruit juice containing at least 90% by volume of juice
- fats and oils for cooking
- bread and bread rolls without icing or filling
- bottled drinking water
- tea and coffee (unless it’s ready to drink)
- fruit, vegetables, fish and soup
- spreads, such as honey, jam and peanut butter
- breakfast cereals
However, there are situations when a food item that is free of GST becomes taxable under the GST tax laws. For example, GST has to be paid for the sale of seeds or planters and when the producer or the butcher will sell their goods, the GST credit can be claimed by such persons. When such persons sell their produce, there is no incidence of GST.
GST, however, is levied on free food items depending on the place of sale or in any place connected with leisure, sport or entertainment.
- restaurant or cafe
- museum
- amusement park
- cinema
- gallery
- sport ground
- gym
- snack bar or stand
- racecourse
- theatre
- golf course
Apart from the above scenario of food items that do not attract GST, there are also many food items where GST is levied starting from 5% to 28%. Given below are the details of the same.
Description | Applicable GST Rate | Availability of Input Tax Credit |
Food services provided by restaurants including takeaway (air-conditioned and non a/c) | 5% | Not available |
Food or drink served at cafeteria or canteen or mess which is operated on a contract basis in any office, industrial unit, or by any school, college, etc on basis of a contractual agreement which is not event-based or occasional | 5% | Not available |
Services provided by restaurants within a hotel with room tariff less than Rs. 7,500 | 5% | Not available |
Services provided by restaurants within a hotel with room tariff of Rs. 7,500 or more | 18% | |
Meals or food services that are provided by Indian Railways or IRCTC or their licensees (both in trains or at platforms) | 5% | Not available |
Food services which are provided in a premise that has been arranged for organizing function along with renting of such premises | 18% | |
Food services that are provided at any exhibition, events, conferences, outdoor & indoor functions (whether event-based or occasional in nature) | 18% | |
Other Accommodation, food and beverage services | 18% |
Given above is the general idea of taxability of food items and beverages based on the place of providing such food and its implications.
Apart from the above tax scenario of the various food items according to their tax brackets is mentioned below.
Description | GST Rate |
GST on container packed vegetables (uncooked/steamed/boiled) | Nil |
GST on vegetables preserved using brine/other means unsuitable for immediate human consumption | Nil |
GST on meat packed in a container having a registered trademark or brand name | 5% |
GST on eggs not in shell/egg yolks boiled or cooked by steaming | 5% |
GST on dried leguminous vegetables packed in a container having a registered trademark or brand name (skinned or split or not) | 5% |
GST on vegetables such as ginger (excluding fresh ginger), turmeric (excluding fresh turmeric), thyme, curry leaves, bay leaves, etc. | 5% |
GST on food such as meal/powder of dried leguminous vegetables | 5% |
GST on fruits, vegetables, nuts and edible plant parts preserved using sugar | 12% |
GST on vegetables, fruits, nuts and edible parts of the plant that are preserved or have been prepared using the vinegar or an acetic acid. | 12% |
GST on food items prepared using flour, malt extract, etc. including cocoa less 40% of total weight. | 18% |
GST on chocolate and other cocoa products | 18% |
Impact of GST on Food
GST has had a significant impact on the food segment with respect to the customers and manufacturers or producers and procurers in the food industry. The impact of GST in this industry can be best explained with the perspective of the customers and restaurant owners or procurers of the food segment.
Impact on Customers
The introduction of GST on the food segment has simplified the billing process. It has foregone the many cess and taxes levied on the food segment and has replaced it with a single tax i.e. the GST. After the implementation of GST on food, the customers have gained a direct benefit of the reduction in the tax structure. However, such reduction in cost has been marginal and moreover, there has been no reduction or change in the service charge that has to be paid by the customers on the overall bill which is inclusive of GST.
Impact on Restaurant Owners
Under the GST regime, the restaurant owners are allowed to take the credit of the input tax paid. This was intended to make an impact on their daily working capital needs direct by increasing the availability of funds. However, the current GST tax structure provides the benefit of input tax credit can be availed only by the restaurant owners and outlets that charge 18% GST under the new tax regime. Whereas, the outlets or restaurants that charge GST at the rate of 5% do not get the benefit of the input tax credit. This limits the benefits available under the GST tax regime for the small businesses in the food industry.
The GST tax structure was introduced with a view to reduce the overall taxes on food and food products. Hence, the revised tax structure does not have any food or related products under the highest tax slab of this tax structure as of now. Therefore, GST has not significantly impacted or introduced any major rate changes in the food industry as much as it has in other sectors or industries.
The rate of taxes across all the food segments has been subject to revision from time to time and such change will be duly announced by the government from time to time.
FAQs – GST on Food
1. What is the highest rate of GST that is applicable on the food segment?
The highest rate of taxation under GST is 28%. Under the current GST laws, there are no food items that are taxed under this highest bracket of GST. Hence, the highest applicable rate under GST for the food segment is currently 18%.
2. Are there any food items with nil charge of GST?
Yes. There are many food items that fall under the NIL charge of GST as per the current tax structure. Government had introduced the GST regime with the intention to reduce the burden of taxes on the food items especially on the essential or basic food commodities. Some of the examples of the food items available under the NIL charge are mentioned below.
- fresh vegetables and chilled vegetables
- non-container packed dried leguminous vegetables whether skinned or split or not
- container packed vegetables (uncooked/steamed/boiled)
- meat
- eggs in shell
- fresh fruits, fresh or dried coconuts
- unsweetened milk (pasteurised/unpasteurised), cream, etc.
- vegetables preserved using brine/other means unsuitable for immediate human consumption
3. Can food items free of GST charge be subsequently taxed?
Yes. Food items that were earlier not liable for GST can later be taxed under the GST tax regime. The instances of these cases are when the GST free food items are sold in a restaurant or cafe or a snack bar or a stand or any other venue that is in relation to a place of leisure, sport or entertainment.
4. What is the rate of GST applicable on chocolate and cocoa products?
Chocolate and cocoa products are not considered under the essential commodities. Hence, the rate of GST applicable on chocolate and cocoa products is the highest applicable rate under GST for the food segment or food industry i.e. 18%.
5. What is the rate of taxation on eggs not in shell/egg yolks boiled or cooked by steaming?
The rate of taxation under GST in case of eggs not in shell/egg yolks boiled or cooked by steaming is 5%.