The government has classified restaurant services under various categories, each with a different GST rate. Here's a breakdown of the current rates:
The GST rules vary depending on the type and scale of the restaurant. Here’s a simple table for reference:
In addition to restaurant services, GST also applies to various food items, which are taxed at different rates based on their type. Here's an overview:
Packaged Food (Branded): 12%
Non-Branded Food (Unpackaged): Exempt from GST
Frozen Foods: 5% for fruits and vegetables, 12% for frozen meat and poultry
Bakery Items: 5% (for biscuits, bread, cakes)
Processed and Ready-to-Eat Foods: 12% (for ready-to-eat meals, noodles, etc.)
Dairy Products: 5% (for items like butter, cheese, and yogurt)
Fresh Fruits and Vegetables: Exempt from GST
Sweets and Confectionery: 18% GST
Aerated Drinks: 28% GST plus 12% cess (for items like sodas and energy drinks)
Edible Oils: 5% GST
Tea, Coffee (not instant), and Spices: 5% GST
Instant Coffee: 18% GST
Organic Food Products: 5% GST for packaged organic items
Implementing GST has brought significant changes to restaurant business owners in India. Let's break down these changes:
Shift in Business Models: Many restaurants, especially small ones, have started exploring cloud kitchens or delivery-only models to reduce overhead costs while complying with GST. This has allowed them to reach more customers without needing a physical dining space.
Effect on Menu Pricing: The differential GST rates (5% for non-AC, 18% for AC) have led to strategic changes in menu pricing. Many restaurants adjust their offerings or segment menus based on dining sections to maintain profitability while staying within GST regulations.
Impact on Franchise Models: GST compliance has become more centralised for restaurants operating under a franchise model. Franchisors are now more involved in ensuring franchisees follow uniform GST practices, which has streamlined operations but increased administrative efforts.
Marketing and Promotions: Some restaurants have offered GST-inclusive pricing to attract customers. This pricing strategy creates a perception of transparency, helping retain customer trust in an increasingly competitive market.
Impact on Small Eateries and Street Vendors: Small eateries and street vendors with turnovers below ₹20 lakhs are exempt from GST. However, the perception that GST applies to all has led to confusion among consumers, sometimes affecting sales in smaller establishments.
Influence on Supply Chain Management: Restaurants now optimise their supply chains to minimize tax burdens. By working with GST-compliant suppliers, they can claim input tax credits more efficiently, reducing overall tax liability.
GST on Food and Restaurants in India continues to influence the industry's operations. While it simplifies the tax structure, small restaurants face challenges, especially without the benefit of input tax credit (ITC). The varying rates for AC, non-AC, and alcohol-serving restaurants have led to changes in pricing and business strategies. By adopting solutions like cloud kitchens, transparent pricing, and efficient management, restaurant owners can navigate the impact of GST and ensure long-term growth and compliance.
1. Can a restaurant charge 18% GST?
Yes, in India 2024, a restaurant can charge 18% GST if it has air-conditioning or serves alcohol. Restaurants in luxury hotels also charge 18% GST. Non-AC restaurants charge 5% GST.
2. Which restaurants cannot charge GST?
When a restaurant chooses the Composition Levy Scheme, it can't charge customers GST. This scheme is for businesses with a turnover of less than ₹50 lakh in the previous year, allowing them to pay a small fixed percentage of their total sales as tax.
3. Is GST applicable on food ordered through online platforms like Swiggy or Zomato?
Yes, food ordered online is subject to the same GST rates as the restaurant providing the food. Typically, this is 5% or 18%, depending on the restaurant type.
4. Can cloud kitchens charge GST?
Cloud kitchens are treated as service providers and must charge 18% GST. They can also claim ITC on their purchases.
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