The new GST rates on food came into force on 22 September 2025. Almost every item moved in the same direction. Ultra-High Temperature (UHT) milk, the long-life kind in tetra packs, pre-packaged paneer and every Indian bread now sit at nil.
Butter, cheese, namkeen, pasta, sauces, biscuits, chocolate and ice cream all sit at 5%.
Only one group went the other way. Aerated drinks, caffeinated drinks and carbonated fruit drinks moved to a 40% rate. On most of them the amount your customer pays did not change, because a cess came off at the same time.
What did not move at all is the rate you charge on a meal. Restaurant service stayed exactly where it was.
This post covers every change on the goods side. It also covers what the change does to your purchase cost, and what to correct in your billing system.
Key Takeaways
- UHT milk, pre-packaged paneer and all Indian breads are now nil
- Butter, cheese, namkeen, biscuits and ice cream are 5%
- Aerated and caffeinated drinks went to 40%, with the cess removed
- Restaurant service is unchanged at 5% without input tax credit
- The date of supply decides the rate, not the date you bought it
What are the New GST Rates on Food?
For food, three numbers now do nearly all the work: nil, 5% and 40%. This section covers where they came from and the date they started applying.
The 56th GST Council met on 3 September 2025 and rebuilt the slab structure. Its official record calls the result “a 2 rate structure with a Standard Rate of 18% and a Merit Rate of 5%”. A special de-merit rate of 40% sits outside the two, for “a select few goods and services”.
The 12% and 28% slabs are gone. Everything that sat in them was moved up or down into the two that remain.
For food, nearly all of it moved down. The Council’s own summary describes a reduction covering “almost all of the food items such as packaged namkeens, Bhujia, Sauces, Pasta, Instant Noodles, Chocolates, Coffee, Preserved Meat, Cornflakes, Butter, Ghee”.
Both goods and services switched over on 22 September 2025. Tobacco was the single exception, held back while the compensation cess obligations were settled.
That wait has since ended. From 1 February 2026 cigarettes and pan masala moved to 40% and bidi to 18%, with the cess replaced by an additional excise duty.
Food came out of that reshuffle better than most. The nil list is the shortest of the three, so it is the place to start.
Which Food Items Moved to Nil GST?
Five entries in the food list went to nil, and three of them are breads. This section lists all five and explains the one condition attached to paneer.
| Food item | Rate until 21 Sep 2025 | Rate from 22 Sep 2025 |
|---|---|---|
| UHT milk | 5% | Nil |
| Chena or paneer, pre-packaged and labelled | 5% | Nil |
| Pizza bread | 5% | Nil |
| Khakhra, chapati or roti | 5% | Nil |
| Paratha, parotta and other Indian breads | 18% | Nil |
Paneer sold loose was already at nil, so this change reaches only the pre-packaged and labelled kind. The reasoning sits in the official FAQ. Paneer “is mostly produced in small scale sector”, and the measure “is intended to promote Indian cottage cheese”.
The bread entry reaches wider than the names in the table suggest. All Indian breads “by whatever name called have been exempted even though only few goods have been mentioned by way of illustrative example”. Your rumali roti and your bhakri are covered without being listed.
Cheese did not follow paneer down to nil. It went to 5%, along with most of the dairy shelf.
Which Food Items Now Sit at 5% GST?
The 5% band is where most of a kitchen’s shopping list landed. This section groups the items by shelf. There are two lists, because the items reached 5% from two different slabs.
From 12% Down to 5%
This list is mostly the dairy counter, the snack aisle and the store cupboard.
| Food group | Items named in the Council list |
|---|---|
| Dairy and fats | Condensed milk, butter, ghee, dairy spreads, cheese |
| Dry fruit and nuts | Almonds, pistachios, dried figs, dried dates, dried citrus |
| Meat and fish | Sausages, prepared or preserved meat, preserved fish, crustaceans |
| Packaged snacks | Namkeen, bhujia, mixture, chabena, savoury extruded snacks |
| Store cupboard | Pasta, instant noodles, sauces, mayonnaise, curry paste, jams, yeast, baking powder |
| Sugar and preserves | Refined sugar, sugar boiled confectionery, preserved vegetables and fruit |
| Drinks | Fruit and nut juices, packaged tender coconut water, soya milk drinks, beverages containing milk, 20 litre water bottles |
From 18% Down to 5%
This is the higher-value end, and it is the one that changes a dessert menu’s economics.
| Food group | Items named in the Council list |
|---|---|
| Bakery | Pastry, cakes, biscuits |
| Chocolate and cocoa | Chocolate, cocoa powder, cocoa butter |
| Breakfast cereal | Corn flakes and other cereal flake products |
| Coffee and tea | Instant coffee, coffee extracts, tea extracts |
| Frozen and prepared | Ice cream and other edible ice, soups and broths |
| Confectionery | Sugar confectionery, other than traditional sweets such as chikki and gajak, which the entry excludes |
| Water and plant milk | Mineral and aerated water without added sugar, plant-based milk drinks |
Sugar confectionery turns up in both tables, because the annexure holds it under two entries that started from different slabs. Both end at 5%, so the split does not change what you charge.
One line in the official FAQ does more work than the whole second table. Asked what happens to anything not named anywhere, the government answered plainly. “Food preparations not elsewhere specified will attract a GST rate of 5%”. So an item you cannot place on either list almost certainly sits at 5% now.
Which Food and Drink Moved to the 40% GST Rate?
Four entries went up rather than down, and on three of them the amount your customer pays is unchanged. This section covers what is in the 40% band and why the bill looks the same.
| Drink category | Rate until 21 Sep 2025 | Rate from 22 Sep 2025 |
|---|---|---|
| Aerated waters with added sugar or flavour | 28% | 40% |
| Caffeinated beverages | 28% | 40% |
| Carbonated beverages of fruit drink | 28% | 40% |
| Other non-alcoholic beverages | 18% | 40% |
Everything in the first three rows carried a compensation cess on top of GST, and that cess has gone.
The official explanation for the increase is direct. These goods “attracted compensation cess in addition to GST. Since it has been decided to end compensation cess levy, the tax has been increased to maintain the pre rate rationalization level of tax”.
Take a 500ml cola. It used to carry 28% GST plus a compensation cess, and now it carries a single 40% line. The total is the same. What changed is that your invoice shows one tax line where it used to show two.
The fourth row is the only genuine increase among the four. Drinks classed as other non-alcoholic beverages sat at 18% and moved to 40%. No cess was coming off to soften that one.
That covers everything you buy. The rate you charge on a meal is a separate question, and it has a shorter answer.
Did the New GST Rates on Food Change Restaurant Billing?
Restaurant billing did not change, and this section covers why the revision left it alone. It also covers the one clarification the Council did add for restaurants.
The Standalone Restaurant Rate Did Not Move
Restaurant service is still 5% without input tax credit at a standalone outlet. The revision covered goods, hotel rooms, transport and a short list of service categories, and restaurant service was not among them.
Our guide to GST billing for restaurants goes through that slab. It also covers why 18% is not a choice you get to make.
The Council also tightened one definition, and it points the same way. It added wording to the meaning of specified premises, making clear that “a stand-alone restaurant cannot declare itself as a ‘specified premises'”.
Such a restaurant “cannot avail the option of paying GST at the rate of 18% with ITC”, which closes a route some outlets had been looking at.
What Changed for Restaurants Inside Hotels
The 18% with credit option belongs to restaurants inside premises that also supply accommodation, and the ₹7,500 a night mark is what usually decides it. The post on GST for hotel rooms covers how that threshold is worked out year by year.
Hotel accommodation itself did move. Rooms at ₹7,500 or less went from 12% with credit to 5% without it.
The same ₹7,500 figure is doing two jobs in this section, which is where most of the confusion starts. One test sets the rate on tonight’s room. The other looks back over the previous year to decide the restaurant’s slab.
What the New GST Rates on Food Do to Your Ingredient Costs
A rate cut on butter is a straight cost cut for one restaurant and barely a ripple for another. This section covers which of the two you are, because it turns entirely on whether you claim input tax credit.
While talking to restaurant owners using Petpooja, one question keeps coming up. The rates fell in September, so why did the monthly purchase total barely move?
The usual answer is that the supplier held the old landed price and took a smaller tax line on the same invoice. None of that is survey data. It is what owners tell us when the talk turns to the kitchen bill.
If You Bill at 5% Without Input Tax Credit
You cannot recover the GST on what you buy, so it sits inside your food cost. When butter, ghee and cheese drop from 12% to 5%, those seven points come straight off your purchase price.
Take a bakery kitchen in Vastrapur buying ₹1,47,800 of butter, ghee and cheese in a month (an example). At 12% it was paying ₹17,736 of tax it could never claim back.
At 5% that figure is ₹7,390. The ₹10,346 difference lands in your profit margin rather than in a credit ledger.
If You Bill at 18% With Input Tax Credit
This is the hotel restaurant and the retail counter rather than the standalone outlet. Here the cut is close to neutral on cost. You were claiming the 12% back, and now you claim 5% back, so the tax was never yours to absorb either way.
What does change is working capital. Less cash goes out on every purchase invoice, and less comes back at filing. The gap you were funding between the two gets smaller.
How to Update the New GST Rates on Food in Your Billing System
The rates changed on a single date, but your item master did not change with them. This section covers the three corrections worth making, in the order they matter.
1. Fix the Tax Slab Against Every Item
Your billing system holds a rate against each item, not against the menu as a whole. A retail counter in Madhapur selling packaged goods carries the most work here. The slab follows the HSN code on every line.
Pull the item list, sort it by tax rate, and work through anything still showing 12 or 28%. Neither slab exists any more, so every row carrying one is wrong.
If you need to confirm a code, the CBIC rate finder is the official lookup. Our HSN and SAC directory covers the codes a food business reaches for most.
2. Reprint Anything That Prints a Rate
Menus, shelf labels and price cards that name a tax rate are now wrong. So is any bill format that prints a slab in its footer.
The digital menu belongs on that list too. A QR menu and a website menu page can carry the same stale rate as the printed card, and neither one costs anything to change.
Reprinting is the cheapest of the three fixes and the one most often skipped, because nobody reads their own menu footer. Keep one master list of what gets printed where and it becomes a morning’s work. That is the point of price list management.
3. Check the Item-Wise Tax Report for a Full Week
The only way to know a change took hold is to look at what actually went out of the door. An item-wise tax report shows the rate applied on every line billed. A single item left on the old slab turns up there long before your accountant finds it in the GSTR-1 working.
Stock bought at the old rate does not get its own treatment. The rate follows the supply rather than the purchase. The official position is that “on goods supplied on or after the revised GST rates are notified, the new GST rates will be applicable on the outward supplies”.
Make those three corrections and the rate on every bill takes care of itself. Skip them and the error surfaces in one of two ways.
What Happens If You Charge the Old GST Rate on Food?
Charging a rate that no longer exists goes wrong in two directions, and only one of them ever gets noticed. This section covers both, and the fix they share.
If You Charged Less Than the New Rate
The shortfall is still yours to pay. This is the risk on the drinks that went up, where an old 28% rate now falls short of 40%.
Tax is due on the supply itself, not on whatever you happened to collect. The difference comes out of your own margin, with interest for the period it was late.
This one usually surfaces at return time, when the output tax your billing system reports does not match the rate the item should have carried. Your accountant finds it before the department does, which is the better of the two outcomes.
If You Charged More Than the New Rate
You cannot keep the extra. This is the risk almost everywhere else, because nearly every food rate came down.
Any amount collected as tax has to be deposited with the government. Whether it was correctly charged in the first place makes no difference.
Say a counter carried on billing a dessert at 18% through October 2025 (an example). It owes the government that full 18%, not the 5% it should have charged.
Overcharging is the worse of the two in practice, because nothing surfaces it. No customer queries an extra few rupees on a ₹180 dessert, so the error runs quietly for months.
How to Correct Either One
Undercharging and overcharging are corrected the same way. You raise a credit note or a debit note against the original invoice, within the time limit your accountant will confirm.
An overcharge needs one against every affected bill, which is why it takes longer to unwind.
There is a catch on the counter side. A credit note only helps where you can identify the customer and actually return the money, and on a walk-in bill there is usually nobody to return it to. What you collected stays payable either way.
So the only thing you can reliably fix is the rate on the next bill. That is why the item master matters more than the correction.
Petpooja is the restaurant POS behind 1,00,000+ restaurant outlets in India. GST has to be configured before the menu module will open, so every rate change lands in one place rather than against each printed card.
Conclusion
The new GST rates on food moved nearly everything down. UHT milk, pre-packaged paneer and every Indian bread are at nil. Butter, cheese, namkeen, pasta, biscuits, chocolate and ice cream all sit at 5%.
The fizzy drinks went to 40%, but a cess came off at the same time, so the total held. Only the drinks classed as other non-alcoholic beverages genuinely cost more than they did.
What the change does not do is apply itself. Each rate sits against an individual item in your billing system. It will keep printing whatever it printed in August 2025 until somebody edits it.
That is the job worth doing this week. Pull the item list and correct anything still sitting on 12 or 28%. Then read a full week of bills back through the item-wise tax report. Those rates live in your restaurant POS, which is where the correction belongs.
Frequently Asked Questions
Two different rates are at work. The meal you sell is taxed as a service at 5% without input tax credit. The September 2025 revision left that alone. The food you buy is taxed as goods, and almost all of it now sits at nil or 5%. Anything not named in either list falls to 5% by default.
Pre-packaged and labelled paneer moved from 5% to nil on 22 September 2025. Paneer sold loose was already at nil before the change, so nothing moved there. Cheese is a separate entry and sits at 5%.
Ice cream and other edible ice went from 18% to 5% as goods. Serving a scoop in your outlet is still restaurant service at 5%. The change shows up in what you pay your supplier, not on the customer’s bill.
Sweetened aerated drinks, caffeinated drinks and carbonated fruit drinks are at 40%. They previously carried 28% GST plus a compensation cess. That cess has been withdrawn, and the rate was raised to hold the total where it was. Your invoice now carries one tax line instead of two, which is worth checking against your E-invoice output.
Yes. GST is levied on the supply. Anything you sell on or after 22 September 2025 carries the new rate, whenever it reached your store. An E-way bill already raised for goods in transit stayed valid and did not have to be regenerated. If you are still setting up, start with GST registration for your restaurant.
