The Goods and Services Tax (GST) landscape for food items and restaurant services in India has recently undergone significant changes aimed at simplifying tax slabs and reducing the tax burden for consumers. From 22 September 2025, the Goods and Services Tax regime moved to a more streamlined structure, primarily 5 % for essentials and 18 % for general services, impacting the food & hospitality industry. Whether you’re dining out, ordering takeaway, buying packaged food items, or operating a restaurant, it’s essential to understand how the rules have changed: from the tax rate you’ll pay to whether your restaurant can claim Input Tax Credit (ITC).

Key Updates from the 2025 GST Reform

On 3 September 2025, the GST Council approved a major overhaul of GST slabs, effective from 22 Sept 2025.
The reform simplified the main tax slabs to 5% and 18% (and a 40% slab for luxury/sin goods) for most items.
Many everyday packaged food items previously taxed at 12% or 18% were brought into the 5% slab or even zero‑rated.

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How GST Applies to Food Items (Post‑Reform)

Essentials vs Processed vs Packaged

Basic unbranded, unpackaged food items (fresh fruits, vegetables, milk, grains, etc.) are mostly at 0% or nil, depending on packaging/branding.
Packaged or branded food and processed items attract 5% or 18% depending on category and processing.
For example, key items like butter, cheese, ice cream, chocolates, and frozen foods have seen reductions of 5% in many cases.

Summary Table for Food Items

Food Category

Current GST Rate (from 22 Sept 2025)

Un‑branded/un‑packaged staples (milk, fruits)

Packaged/branded basic food items

Processed/ready‑to‑eat / snack items

5% or 18% depending on the category

Luxury/trendy food (premium chocolates, frozen pizza)

18%

How GST Applies to Restaurants & Catering Services

Restaurant Service Rates & ITC Eligibility

For standalone restaurants (dine‑in or takeaway) not part of a “specified premises”, the rate remains 5%, and no ITC is allowed.
For restaurants inside hotels classified as “specified premises” (room tariff ≥ ₹7,500 per day), the rate is 18% and ITC is allowed.
If a hotel‑restaurant is not a “specified premises”, it may choose to pay 18% with ITC or remain at 5% without ITC (subject to declaration).
Catering services (outdoor events, functions) are generally taxed at 18% with ITC (post reform).

Updated Restaurant Service Table

Service Type

GST Rate

ITC Eligibility

Standalone restaurant (dine‑in/takeaway)

Restaurant within hotel (room tariff < ₹7,500)

Restaurant within hotel (room tariff ≥ ₹7,500)

18%

Yes

Catering services/outdoor food provision

18%

Yes

Implications for Business and Consumers

Consumers: Dining out at standard standalone restaurants should now see a consistent 5% GST (lower than previous slabs of 12–18%), making meals more affordable.
Businesses: Restaurants at 5% slab cannot claim ITC, which impacts cost structure; those eligible for an 18% slab with ITC may need to evaluate whether to shift to that structure.
Food processors/retailers: Reduction of GST on many packaged/processed food items to 5% helps lower input costs and potentially retail prices.
Compliance: Businesses must reassess GST classifications and ensure invoicing reflects the new slab and ITC eligibility.
Strategic decisions: Hotels/restaurants may evaluate whether their premises qualify as “specified” and decide the appropriate GST treatment.

Conclusion

The September 2025 GST reforms mark a major shift in how food items and restaurant services are taxed in India. With essentials moving into lower slabs and restaurant dining being taxed at 5% in many cases, the changes aim to ease the tax burden on consumers and simplify compliance for businesses. However, distinctions remain especially for restaurants inside hotels and packaged/processed food items, and the ability to claim ITC still depends on the GST slab elected. Business owners, diners, and retailers alike should ensure they understand the new slab structure, update their pricing and invoicing, and factor in input tax credit implications to align with the updated GST regime.

Frequently Asked Questions (FAQs)

What is the GST rate for a simple takeaway meal?

If it’s a standalone restaurant (not part of a hotel “specified premises”), the rate is 5% with no ITC for the outlet.

If I dine in a restaurant inside a hotel, what GST do I pay?

If the hotel room tariff is ₹7,500 or more per day, then GST is 18% and the restaurant can claim ITC; if less, then 5% without ITC.

Are fresh vegetables and milk taxed under GST?

Most un‑branded, unpackaged fresh food items like fruits, vegetables and milk are at 0% (nil rate) under the new structure.

Does the GST rate change for luxury food items?

Yes — premium snack items or ready‑to‑eat frozen food may attract 18% under the updated rules.

If a restaurant at 5% slab buys raw material with GST paid, can it claim ITC?

No — under the 5% slab for restaurants, the business cannot claim Input Tax Credit on purchases.

Has the GST rate on many packaged food items been lowered?

Yes — following the 22 Sept 2025 reform, many packaged or branded food items moved from higher slabs (12–18%) to 5% or 0%.

Does delivery or takeaway change the GST rate?

Generally, the same rate (5%) applies for a standalone restaurant takeaway, but classification should be carefully checked in each case.

Can a hotel‑restaurant choose between 5% and 18%?

If the hotel is not a “specified premises”, the restaurant may opt for 18% with ITC or remain at 5% without ITC as per the rules.

How should invoices reflect the new GST slabs?

The invoice must clearly show the GST rate (5% or 18%), GSTIN, taxable value, and tax amount. Businesses must update systems to use new rates.

When did these new rates become effective?

The reforms, including many of these food/restaurant rate changes, came into effect from 22 September 2025.

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