Decoding Restaurants HSN/SAC Codes and GST Rates in India
Decoding Restaurants HSN/SAC Codes and GST Rates in India
Identify the correct SAC code for restaurant services, calculate GST rates for standalone vs hotel dining, and configure sales entries in Tally.
Who is this for: GST & Indirect Tax
Operating a food and beverage business in India requires choosing correct HSN and SAC codes for tax invoicing. Under the GST regime, restaurant sales are classified as services rather than supply of goods.
Understanding SAC codes, different tax brackets, and how to record transactions is essential to prevent audit disputes.
1. HSN vs. SAC: What's the Difference?
HSN (Harmonized System of Nomenclature) codes are used to classify goods, whereas SAC (Services Accounting Code) codes are used to classify services.
Because the supply of food and beverages in a restaurant involves service elements (cooking, sitting space, cleaning), it is classified as a service. Restaurants use **SAC Code 9963** to prepare GST-compliant sales invoices.
2. Understanding SAC Codes for Restaurants
The SAC system uses specific 6-digit codes to identify different service formats:
| SAC Code | Description of Service | Applicable GST Rate |
|---|---|---|
| 996331 | Services provided by restaurants, cafes, and takeaway joints | 5% (Without ITC) / 18% (With ITC in premium hotels) |
| 996332 | Services provided by mobile food counters and food trucks | 5% (Without ITC) |
| 996333 | Outdoor catering services for weddings and corporate events | 5% (Without ITC) |
| 996335 | Food prep and supply services on trains or cruise lines | 5% (Without ITC) |
3. GST Rates Applicable to Restaurants: What You Need to Know
The GST rate depends on where the service is provided and the room tariff if located in a hotel:
- Standalone Restaurants: Cafe, dining rooms, and takeaway outlets charge **5% GST** (2.5% CGST + 2.5% SGST) but cannot claim any Input Tax Credit (ITC) on inputs like rent or ingredients.
- Premium Hotel Premises: If the restaurant operates inside a hotel where any room tariff is **₹7,500 per night or more**, it must charge **18% GST** (9% CGST + 9% SGST) and can claim full ITC.
- Composition Scheme: Small restaurants opting for the composition scheme pay a flat **5% tax** on turnover, and are not allowed to collect tax from customers.
4. Special GST Rates for Restaurants
Under Section 9(5) of the CGST Act, e-commerce food aggregators (like Zomato and Swiggy) collect the 5% GST on behalf of restaurants for deliveries. This prevents tax evasion by unregistered restaurant owners. Standalone sweets shops and bakeries that sell pre-packaged items along with food service must separate these transactions: packaged snacks are taxed at their individual product rates (e.g. 12% or 18% GST), while hot meals are taxed at 5% GST.
5. Case Study: Invoicing stand-alone restaurant transactions
A standalone restaurant prepares a bill for a dining customer:
- Food Order Total: ₹2,000
- SAC Code Applied: 996331
- GST (5% without ITC): ₹100 (₹50 CGST + ₹50 SGST)Tax = ₹2,000 * 5% = ₹100
- Final Customer Invoice: ₹2,100
- Accounting Entry: The accountant debits Cash and credits the Sales and Tax accounts. Becausestandalone restaurants cannot claim ITC, no tax offset is booked for supplier purchases (e.g. kitchen equipment or groceries).
Entry: Restaurant Sales Voucher (F8 Sales Voucher) Debit: Cash / Sundry Debtors Account ₹2,100 Credit: Food Sales Income Account ₹2,000 Credit: CGST Payable Ledger (2.5%) ₹50 Credit: SGST Payable Ledger (2.5%) ₹50
6. Must-Know Tips for Restaurant Owners
To maintain tax compliance:
- Ensure the SAC code **996331** is printed on all customer invoices.
- Separate sales of packaged soft drinks (typically 28% GST + cess) from cooked meals (5% GST).
- Reconcile GSTR-1 filings against Swiggy/Zomato TCS statements to match sales reporting.
7. Configuring SAC Codes in Tally Prime
To set up service ledgers in Tally:
Tally Sales Ledger:
Go to **Gateway of Tally > Create > Ledger**. Create **Food Sales Account** under **Sales Accounts**.
Set **Is GST Applicable** to **Applicable**, choose **Set/Alter GST Details**, select **Sales Taxable**, enter SAC **996331**, and specify the **5%** integrated tax rate.
Tax Lawyer & GST Compliance Expert