GST Tax Rate for Takeaway Food Outlets in Uttar Pradesh
Takeaway food outlets are classified as restaurant services, requiring a 5% GST rate under the composition scheme.
- Ruling
- Order No. 01 dated 21.03.2018
- Dated
- 21 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if takeaway food is manufacturing or a restaurant service.
- The Authority ruled that all food supply is a service under GST.
- Takeaway outlets must pay 5% GST, not the 1% manufacturing rate.
In short
The company asked the Uttar Pradesh Authority for Advance Ruling (AAR) whether a food outlet with no seating is a manufacturer or a restaurant. They wanted to know if they could pay the lower 1% GST rate meant for manufacturers. The Authority decided that selling food is always a service, regardless of whether there is a place to sit.
What has changed
How it worked before
Many business owners assumed that preparing food without providing seating or table service qualified as manufacturing goods, which would allow them to pay a lower 1% tax rate.
What has changed
The Authority confirmed that under the GST law, supplying food for human consumption is always treated as a service. This means takeaway businesses must pay the 5% restaurant service rate instead of the 1% manufacturing rate.
Who this affects
Owners of takeaway food counters, cloud kitchens, and food stalls without seating facilities.
An example
Imagine a business owner, 'QuickBite Snacks', who opens a small kiosk selling only packed sandwiches for takeaway. They assume they are a manufacturer and register for the 1% composition rate. Based on this ruling, the tax department would likely classify them as a restaurant service provider. QuickBite would then be required to pay the 5% rate and may face penalties for underpaying their taxes.
What you should do
If you run a similar business, you should prepare to pay the 5% GST rate. Remember that an Advance Ruling only binds the specific business that asked for it and their local tax office. Your own tax officer may have a different view, so consult with a professional before changing your tax filings.
If you do nothing
If you incorrectly pay the 1% manufacturing rate when you should be paying 5%, the tax department may issue a notice for the unpaid tax difference. You will likely be charged interest on the shortfall and may face additional penalties for incorrect classification. It is safer to align your tax payments with this interpretation to avoid future disputes.
The terms explained
- Supply of service
- Under GST, this is a legal category that includes the supply of food or drinks for human consumption, even if no seating is provided.
- Composition scheme
- A simplified tax payment method for small businesses that allows them to pay a fixed percentage of their turnover as tax.
- Advance ruling
- A formal decision from the tax authority on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
Shri Ananya Goel
Order No. 01 dated 21.03.2018 · Uttar Pradesh
Questions before the authority
- Whether the activity of 'Manufacturing food as take away only with no sitting facility' is a restaurant service or manufacturing of goods?
- Whether the applicant falls under Restaurant Service with Rate of Tax @5% under Composition Scheme or under Manufacturer with Rate of Tax @1% under Composition Scheme?
Facts
The applicant intends to start a 'Food counter sale joint' providing only packed food for takeaway with no seating arrangements for customers. The applicant contends that since no service is provided, the activity should be classified as manufacturing of goods rather than a restaurant service. The applicant seeks clarification on the applicable tax rate and classification under the GST composition scheme.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of activity | Supply of service Classified under Schedule II, Paragraph 6(b) |
| Applicable tax rate | 5% (2.5% CGST + 2.5% SGST) Under the composition scheme for restaurant services |
The Authority ruled that the supply of food items in the manner described constitutes a 'supply of service' under Schedule II of the GST Act. Consequently, the applicant is liable to pay tax at the rate of 2.5% under the CGST Act and 2.5% under the SGST Act, totaling 5% under the composition scheme for restaurant services.
Reasoning
The Authority relied on Schedule II, Paragraph 6(b) of the GST Act, which explicitly classifies the supply of food or any other article for human consumption as a 'supply of service'. Since the activity falls under this provision, the applicant is treated as a person engaged in supplying services. Therefore, the applicant is ineligible for the 1% manufacturing composition rate and must pay the 5% rate applicable to restaurant services under Section 10 of the GST Act.
Provisions relied on
- Section 7(1)(d) of the CGST/UPGST Act
- Schedule II, Paragraph 6(b) of the CGST/UPGST Act
- Section 10 of the CGST/UPGST Act
For the practitioner
This ruling clarifies that **takeaway food outlets** without seating are classified as a **supply of service** rather than manufacturing. It settles that such businesses must opt for the 5% composition rate for restaurants. It does not provide relief for those seeking the lower 1% manufacturing rate for food preparation activities.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/up_aar_01_21.03.2018_ag.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.