GST on Supply of Food & Beverage Services

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  • By Taxmann
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  • Last Updated on 28 June, 2021

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The term ‘Restaurant’ has not been defined under GST law. In common parlance, ‘restaurant’ can be understood as a place where people pay to sit and eat meals that are cooked and served within the premises.
The taxability of the services provided by the restaurants and the scope of the term ‘restaurants’ have been elaborated under GST regime. It is no longer only a place where people go, sit and eat. Various other terms such as canteen, mess, takeaways, catering, etc., have been incorporated in restaurant services. Unlike Service Tax law, there are no restrictions on whether the restaurant is an air conditioned one or non-air conditioned and whether it is serving alcohol or not.
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GST Rates on Accomodation, Food & Beverage Services:

Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, Serial No. 7 under Heading No. 9963 (Accommodation, food and beverage services), prescribes the following GST rates:-

Description Applicable GST Rate
Food services provided by restaurants including takeaway facility (both air-conditioned and non-air conditioned )

 

 5% with No ITC
Any food/drink served at cafeteria/canteen/mess operating on contract basis in office, industrial unit, or by any institution or by any other person on basis of contractual agreement which is not event based or occasional

 

5% with No ITC
Restaurant services provided by restaurants located within a hotel featuring room tariff less than Rs. 7,500

 

5% with No ITC
Restaurant services provided by restaurants located within a hotel featuring room tariff of Rs. 7,500 and above

 

18%
Meals/food services provided by Indian Railways/IRCTC or their licensees both in trains or at platforms

 

5% with No ITC
Food services in a premises arranged for organizing function along with renting of such premises

 

 18%
Food services at exhibition, events, conferences, outdoor & indoor functions that are event based or occasional in nature

 

 18%
Other Accommodation, food and beverage services

 

 18%

Food ordered through e-commerce operator:

 

Cloud kitchens, delivery kitchens and or food delivery applications would be covered by the definition of e-commerce operators. 

 

Most of these e-commerce operators enter into contracts with the restaurant owners and offer restaurant search and delivery services through their website or mobile application. Customer places order by using their website or apps. Aggregators are responsible to take customer order from the restaurant premises and deliver the food to end consumer.

 

The entire transaction in relation to food ordered via e-commerce operator is divided into 2 parts:-

 

1. Food is delivered by the e-commerce operator’s hired/ contracted delivery boy from restaurant premises to place of buyer. Bill of restaurant is handed over to the buyer

 

– In this case GST charged by the restaurant will be rate of restaurant services, i.e., either 5% or 18% as the case may be. 

2. Delivery fee charged by e-commerce operator from buyers

 

– E-commerce operator will charge GST at 18% from customers on delivery charges collected from the customer and it shall not form part of restaurant services but would be classified under HSN 9968, being a part of postal & courier services.

 

Given below is the summary of food ordered by A in Delhi through XYZ.com (e-commerce operator):-

 

Particulars

Amount

Burger ordered (1* 129)

129.00

Restaurant Handling Charges

29.00

Delivery Charge

16.00

GST – CGST

          – Delhi GST

3.95

 

3.95

Promo Code: 40% Discount

(51.60)

Total

130.30

 

Let us analysis how GST is charged and at what rate:-

 
Particulars Amount GST @ 5% Analysis

Burger

 129 6.45 Rate of 5% is levied on burger and handling charges/ Packing charges being a ‘composite supply’ of restaurant services
Restaurant Handling Charges 29 1.45
Total 158 7.90  
Delivery Charges 16

–

 This amount is inclusive of GST. These charges are recovered by XYZ.com and does not form a part of restaurant services.

Applicable GST rate of postal services, i.e., 18% is levied on this amount.
Promo-(40% Discount) (51.60) – It is a form of discount offered by XYZ.com. Since it is not offered by restaurant itself, hence, GST is levied on the actual value of burger and handling charges without giving effect to discount allowed.

 

Tax implications on Tip given to delivery boy:

Sometimes consideration in the form of ‘Tip’ is given to the person who delivers the food parcel, which is over and above the total amount. Such amount is not fixed and is not mandatorily required to be paid. ‘Tip’ given by customer depends on the satisfaction level of the customer, time taken by the delivery boy to deliver the respective order. Therefore, it is classified as transaction in money (neither goods nor services) and will not be considered as a part of restaurant or delivery services and, hence, GST is not applicable on this amount.  

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