How is the rate of GST on food and beverages determined?

The Goods and Services Tax (GST) on food and beverages in India varies depending on the type of food product and the circumstances in which it is sold or consumed. The GST rates are broadly classified into categories like essential food items, processed food, and luxury items, with different tax treatments.

1. Zero-Rated (Exempt) GST:
   • Unprocessed Food Items: Most basic, unprocessed, or minimally processed food items are exempt from GST. These include:
     • Fresh fruits and vegetables
     • Rice, wheat, pulses
     • Milk, curd, and buttermilk
     • Fresh eggs, fish, and meat
     • Non-packaged food sold in the raw state
   • GST Exemption: These items are considered essential, and thus GST is not applied to them, as they are necessary for daily living.
2. 5% GST:
   • Certain processed or packaged food items are subject to a 5% GST rate. Examples include:
     • Flour (like atta and maida)
     • Packaged bread and bakery products
     • Sweets (e.g., plain sugar sweets)
     • Honey
     • Vegetable juices
     • Frozen foods
     • Ice cream (unbranded)
3. 12% and 18% GST:
   • Some value-added food products and prepared or ready-to-eat foods attract higher GST rates:
     • Processed foods, cooked meals (e.g., from restaurants, eateries, and catering services), and sweetened beverages may attract 12% to 18% GST.
     • Canned/packed food items, such as processed snacks, beverages, and certain ready-to-eat products, are taxed at 12% or 18% depending on the type.
4. 28% GST:
   • Certain luxury foods and beverages like alcoholic beverages are taxed at the highest rate of 28% GST along with an additional cess. This includes:
     • Alcoholic drinks (wine, beer, spirits)
     • Aerated soft drinks
     • Packaged junk food (e.g., potato chips, candy bars, carbonated drinks)
5. Restaurants and Catering Services:
   • GST on restaurant bills varies depending on whether the service is air-conditioned or not. It is typically:
     • 5% GST for non-AC restaurants (without input tax credit)
     • 18% GST for air-conditioned restaurants or restaurants with a liquor license (with input tax credit).
   • GST on catering services also follows this pattern.

Provision and Acts in the Indian Constitution

While the Indian Constitution itself does not directly mention the Goods and Services Tax (GST), it provides the constitutional framework that enabled the implementation of GST. Key provisions include:

1. 101st Constitutional Amendment Act (2016):
   • The 101st Amendment introduced GST in India, giving the central and state governments concurrent authority to levy GST on the same goods and services.
   • Article 246A: Grants the Union and State Legislatures the authority to levy and collect GST on goods and services. It ensures a uniform system of taxation for the entire country.
   • Article 279A: Establishes the GST Council, a body consisting of the Finance Ministers of the Union and States. This council recommends the rates of GST and the classification of goods and services.
   • Article 269A: Pertains to the interstate sale of goods and services, allowing the central government to levy and collect tax on the inter-state supply of goods and services.
2. GST Act (2017):
   • The Central Goods and Services Tax Act, 2017 (CGST) and the State Goods and Services Tax Act, 2017 (SGST) provide the legal framework for the implementation and regulation of GST. It defines:
     • The types of goods and services that are exempt from GST (such as food items).
     • The rates of GST on different goods and services (including food and beverages).
     • The mechanisms for collection, filing of returns, and claiming input tax credits.
3. The Integrated Goods and Services Tax Act (2017) (IGST):
   • The IGST Act deals with the taxation of interstate transactions and the handling of GST when goods or services are supplied from one state to another.

Landmark Cases in GST on Food and Beverages

Several landmark cases have shaped the understanding and application of GST on food and beverages in India. Some significant cases include:

1. M/s. V. G. Ramachandran v. Union of India (2019): This case addressed whether certain unbranded food items should be subject to GST. The court ruled that unbranded food sold in bulk would continue to be exempt from GST, even if it was processed or packaged for sale.
2. Café Coffee Day v. GST Department (2020): The case dealt with the classification of food items served in restaurants. The issue arose when Café Coffee Day sought clarity on the GST rate applied to food and beverages served at their outlets. The court upheld that the GST on food and beverage served in restaurants should depend on whether the service was provided with or without air conditioning, as per the existing GST framework.
3. M/s. A.N. S. Catering Services Pvt. Ltd. v. Union of India (2018): This case involved a dispute about GST on catering services and food delivery services. The case clarified that GST on catering services is dependent on the nature of the service (whether it is served in a restaurant, or delivered to a customer) and the location of service, whether air-conditioned or not.
4. Coca-Cola India Pvt. Ltd. v. Union of India (2018): In this landmark case, the issue at hand was whether soft drinks and carbonated beverages should be taxed at a higher GST rate due to their classification as “luxury” items. The court confirmed that beverages such as aerated drinks and carbonated drinks fall under the 28% GST slab, with an additional cess.
5. Association of Indian Breweries v. GST Council (2019): This case dealt with the GST rate on alcoholic beverages. It was argued that the GST rate on alcohol was disproportionately high compared to other beverages. The case concluded that alcoholic beverages are subject to 28% GST, which includes the imposition of a cess, as these are luxury products.

Conclusion

The GST on food and beverages in India is determined by the nature of the food product and how it is sold or consumed. Basic, unprocessed food items are exempt from GST, while processed foods, luxury items, and prepared meals are subject to varying tax rates from 5% to 28%, with the highest rate typically applied to items such as alcohol and luxury soft drinks. The 101st Constitutional Amendment Act (2016) and the GST Act (2017) provide the legal framework for the imposition and regulation of GST, and several landmark cases have clarified the nuances in applying GST to food and beverages.