The food service sector in India has changed significantly over the last few years. The food market will reach over ₹7.5 lakh crore by 2028, driven by the growth of cloud kitchens, quick-service restaurants, and food delivery services. As the business becomes more organized, compliance standards also increase. One major part of this compliance includes understanding the correct HSN code for restaurant food items, mainly because different formats follow different tax structures.

The right way to use Restaurant HSN Codes and GST rates is one of the biggest legal blind spots restaurant owners have right now. The government now uses automated data checks on GST returns, e-way bills, invoices, and records from online shipping platforms. This means that even small classification errors can lead to notices or gaps in reconciliation.

Knowing the correct HSN code isn’t just a small part of accounting anymore; it’s essential for being accurate with money, following the rules, and maintaining a clean business.

Why Do Restaurants Need to Know About HSN Codes?

HSN numbers (Harmonised System of Nomenclature) were created to make sure that products and services are organized in the same way across India and internationally. This isn’t just a rule for businesses; it has an impact on-

• The sales tax is applied to consumers
• Whether you can get the ITC
• How do you charge for dine-in, takeout, catering, or packed food
• If your bills match your GST returns

The system instantly flags it if it’s not classified, because the GST department now uses AI to identify patterns in invoices and filings, especially in sectors that are growing quickly, like food service and restaurants.

Indeed, the restaurant industry is experiencing significant growth. The food service market in India is projected to cross ₹7.5 lakh crore by 2028, according to recent estimates. This is because of the strong growth of cloud kitchens, QSR chains, and online deliveries. 

Since 2022, GST collections from restaurants have been rising slowly as people eat out and travel again after the pandemic. So, it’s more important than ever to have clear categories.

The Correct Restaurant HSN Code

Most restaurant owners only need to remember one main code:

996331- Restaurant services including dine-in, takeaway, or food delivery. If you’re running a business like those listed below, this code applies if you are offering cooked food for people to eat.

No matter whether the customer buys on Swiggy, eats at your restaurant, or takes the food home, the code remains the same.

• Fine-dining restaurant
• Bakery with dine-in ordering
• Juice bar or fast food joint
• Cafe
• QSR (Quick Service Restaurant)
• Cloud kitchen

Why Restaurants Get GST Notices

When billing software and online platforms are linked, authorities can easily find discrepancies. According to CA reports and GST data trends, the leading causes are-

• Misusing the HSN or SAC code.
• Inconsistently using different GST rates.
• Selling pre-packaged and cooked food under a single code
• Mismatch of GST returns and POS
• Invoices from Swiggy/Zomato and internal bills do not match.

What GST Rate Applies?

The GST tax rate and HSN code for restaurant food items vary depending on where and how you run your business, not on what kind of food you serve. Standalone restaurants, quick-service restaurants (QSRs), cafés, and cloud kitchens all have a 5% Goods and Services Tax (GST) without Input Tax Credit (ITC) for dine-in, takeaway, and delivery, in most cases. 

But restaurants in high-end hotels where the cost of staying is more than the government level (previously ₹7,500 and above) are in a different category and could be charged 18% GST with ITC benefits. In short, everyday restaurants are in the 5% slab, while luxury eating setups are in the 18% slab.

How to Stay Error-Free

You don’t need to know a lot about finances; just use this simple system. If you set this up in your billing system now, you won’t have to deal with any problems later.

Wrapping It Up

Compliance shouldn’t make running a restaurant harder, which is already hard enough. With the right restaurant HSN code, you can avoid GST notices, keep your bills accurate, make audits easier, and keep your business clean and scalable. If you want to grow, whether through a franchise, a cloud kitchen, or selling branded goods in supermarkets, ensuring your GST classification and the correct HSN code for restaurant food items is applied now will save you unnecessary compliance trouble in the future.

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