India 
Canada
GST Applicability for Bakery &Restaurant Operations
Understanding Classification as “Restaurant Service” and Applicable GST Rates
Based on a detailed examination of relevant GST law provisions, CBIC circulars, judicial rulings, and departmental clarifications, we provide the following professional opinion regarding the GST applicability on bakery operations in India:
1.Classification of Bakery Operations as “Restaurant Service”
As per Circular No. 164/20/2021-GST dated 06.10.2021 issued by the Central Board of Indirect Taxes and Customs (CBIC), supply of food or beverages for consumption—whether on-premises, takeaway, or delivery—qualifies as “restaurant service” and is taxable at 5% GST without Input Tax Credit (ITC).
Definition (Restaurant Service):
Any service involving preparation and supply of food or beverages for immediate consumption, regardless of the mode of delivery (dine-in, takeaway, or home delivery), provided the food is prepared on-site.
A bakery qualifies as a “restaurant” for GST purposes if:
- It prepares food and beverages on-site,
- It provides immediate consumption options (dine-in, takeaway, delivery),
- Its primary supply is service-oriented, not merely sale of goods.
In such cases, GST is applicable at 5% without ITC under HSN Code 996331.
2. Supporting Judicial Precedent
Several Advance Ruling Authorities (AARs) have ruled on similar matters:
- Kerala AAR (Order dated 09.08.2024):
Bakery supplying ready-to-eat items such as samosa chaat and panipuri on the premises qualifies as providing restaurant services—taxable at 5% without ITC. - Gujarat AAR:
Clarified that food supplied from restaurants, even as takeaway, attracts 5% GST as long as food is prepared and served as part of service. - Odisha AAAR (Contrary View):
Ruled that sale of only pre-packed bakery items (without service or on-site preparation) does not constitute restaurant service and attracts the applicable item-wise GST rates.
3.Critical Distinction for GST Classification
| Nature of Supply | GST Treatment |
| 🍽️ On-site preparation with dine-in or takeaway | 5% GST without ITC as Restaurant Service |
| 📦 Sale of pre-packaged goods (no service) | GST as per item rate, e.g., Cake @18%, Bread @0%, Pastry @18% |
⚠️If the principal supply is goods only, and there’s no value-added service component, the supply cannot be treated under restaurant service.
4. Final Certification and Professional Opinion
on the above:
- A bakery offering on-site preparation and service (whether dine-in, takeaway, or delivery) qualifies as a restaurant under GST and is liable to pay 5% GST without ITC.
- A bakery selling only pre-packaged items, without service or on-site preparation, must charge GST based on the HSN code and individual item rate.
5. Recommendation to Businesses
It is strongly advised that each bakery:
- Evaluates its operations to determine whether it is service-dominant or product-dominant,
- Maintains proper records of sale formats (prepared vs pre-packaged),
- Seeks periodic GST advisory from a registered tax professional to ensure accurate classification and compliance.
📌For accurate legal positioning, businesses should document the nature of transactions, customer service formats, and food preparation practices in case of audit or dispute.
