GST on Food Items in India 2026: Complete Rate Guide for Food Businesses

GST and Food: Why It Matters for Food Businesses

GST (Goods and Services Tax) significantly impacts food businesses in India — both in terms of the GST they pay on inputs and the GST they collect from customers. Getting GST classification wrong leads to either tax over-payment (hurting margins) or under-payment (creating tax liability, interest, and penalties). This guide covers GST rates for key food categories and practical guidance for food business compliance.

GST Registration Threshold for Food Businesses

GST registration is mandatory for food businesses when:

• Annual aggregate turnover exceeds ₹40 lakh (for goods suppliers, including food manufacturers)
• Annual aggregate turnover exceeds ₹20 lakh (for service providers, including restaurants and caterers)
• Annual aggregate turnover exceeds ₹10 lakh (for North-Eastern states and special category states)
• You sell on e-commerce platforms (mandatory GST registration regardless of turnover)
• You engage in inter-state supply of goods

GST Rates for Key Food Categories

Nil (0%) GST — Exempt Foods

These food items attract no GST:

• Fresh fruits and vegetables
• Fresh/chilled meat and fish (unprocessed)
• Eggs (fresh)
• Fresh milk, cream, curd, lassi, buttermilk (in loose/unpackaged form)
• Natural honey (unprocessed)
• Fresh ginger, fresh turmeric
• Cereal grains in bulk (wheat, rice, pulses in bags over 25 kg)
• Jaggery / gur
• Salt (common salt)
• Bread (not including pizza bread, in traditional forms)
• Prasad / religious offerings

5% GST Foods

Food Category	GST Rate
Packaged and labelled cereals, pulses, flour (in retail packs ≤25 kg)	5%
Packaged curd, paneer, ghee, butter	5%
Sugar	5%
Edible oils (all types)	5%
Coffee (except instant coffee)	5%
Tea (except tea in retail packets)	5%
Ice cream (not in restaurant)	18%
Spices (all dried spices)	5%
Namkeen, bhujia, snacks	12%
Packaged fruit juice (100% juice)	12%
Aerated drinks / soft drinks	28% + 12% cess

GST for Restaurants

Restaurant GST is a separate and simpler structure:

Restaurant Type	GST Rate	Input Tax Credit?
Standalone restaurants (AC or non-AC)	5%	No ITC allowed
Restaurants in 5-star hotels	18%	ITC allowed
Cloud kitchens / delivery-only	5%	No ITC allowed
Catering services	5%	No ITC allowed

Composition Scheme for Small Food Businesses

Food businesses with annual turnover up to ₹1.5 crore can opt for the Composition Scheme:

• Restaurants: Pay 5% composition tax (on turnover, instead of collecting 5% GST from customers)
• Food manufacturers: 1% composition tax
• Advantages: Simple compliance — quarterly returns, no detailed input-output matching
• Disadvantages: Cannot issue taxable invoices, cannot claim ITC, cannot supply to other registered businesses for credit
• Not available for: Businesses with inter-state supply, e-commerce sellers

Common GST Compliance Issues for Food Businesses

• Incorrect GST rate classification: Applying nil rate to branded packaged products that attract 5% — leads to GST demand with interest and penalty on audit
• Packaged vs. unpackaged distinction: The same product in branded retail packaging attracts GST; in loose unbranded form may be exempt
• Restaurant charging 12% or 18% GST: Most restaurants should charge only 5% — overcharging is a consumer protection issue
• Non-registration by e-commerce sellers: Every food seller on Amazon, Flipkart, Zomato, Swiggy must be GST registered — no turnover threshold exemption

Conclusion

GST compliance for food businesses is complex because of the multiple rate slabs and the packaged vs. unpackaged distinction. Getting your GST classification right from day one saves significant amounts in tax and avoids future disputes with the GST department. Velco Legal India helps food businesses with GST registration, filing, and compliance — in addition to FSSAI licensing. Our one-stop service covers all your food business compliance needs.