When India rolled out the Goods and Services Tax (GST) in 2017, the most immediate question for households and food businesses alike was: How will this affect our daily meals and dining out bills? From grocery staples to weekend dinners at restaurants, GST has reshaped pricing, compliance, and consumer behavior.
GST on Food Items: Essentials vs Processed Foods
One of the biggest distinctions in GST lies between essential food items and processed or packaged foods.
- 0% GST: Unpackaged essentials like fresh milk, curd, rice, wheat, flour, pulses, fruits, and vegetables. These remain tax-free to protect household budgets.
- 5% GST: Branded cereals, edible oils, packaged food grains, and frozen vegetables.
- 12% GST: Butter, cheese, ghee, packaged dry fruits, and frozen meat.
- 18% GST: Processed foods like chocolates, biscuits, soft drinks, ice cream, and ready-to-eat meals.
This structure ensures daily essentials remain affordable while luxury and processed foods contribute higher tax revenue.
GST on Restaurants: Dining Out Costs Explained
Eating out has also seen a shift under GST. Initially, different tax slabs for AC and non-AC restaurants caused confusion, but reforms have simplified the system.
- 5% GST (No Input Tax Credit): All standalone restaurants, whether AC or non-AC, levy a flat 5%. However, they cannot claim input tax credit (ITC) on supplies.
- 18% GST (With Input Tax Credit): Restaurants inside hotels charging ₹7,500 or more per night fall under this category. These can claim ITC.
- Takeaway & Delivery: Apps like Swiggy and Zomato are also taxed at 5%, keeping parity with dine-in orders.
Impact on Businesses and Consumers
For consumers, GST has simplified billing—no more service tax, VAT, or confusing cess add-ons. A restaurant bill is now easier to understand, though the lack of ITC has pushed some eateries to increase base prices.
For businesses, especially small restaurants and food brands, classification is key. Misapplying GST—say, charging 5% on items that should be taxed at 18%—can invite penalties. Many food entrepreneurs now rely on consultants or billing software to stay compliant.
The Bigger Picture
The GST system for food and restaurants reflects India’s policy balance: shield essentials from price inflation while taxing processed and luxury consumption more heavily. For diners, it explains why milk remains tax-free but an ice cream sundae attracts an 18% levy. For businesses, mastering GST isn’t optional—it’s essential for survival in a competitive, compliance-driven food market.
Bottom Line
GST on food and restaurants has streamlined India’s tax structure, but it has also redefined margins, pricing strategies, and even dining habits. For consumers, awareness helps in making smarter choices. For businesses, compliance is non-negotiable—and getting it right could be the difference between thriving or shutting shop.
