GST on Bakery Products - Cakes, Pastries, Biscuits etc

GST on Bakery Products

The bakery outlets usually supply bakery products such as cakes, pastries, biscuits, cookies, bread, buns, cupcakes, muffins, rusks, rusks, etc. which are taxable under Goods and Service Tax (GST). In addition to the above products nowadays, bakery shops also sell food products such as sandwiches, samosas, rolls, pizzas, and cold drinks.

In this article, we will discuss various aspects such as the applicability of GST on bakery products in India, the HSN codes and the classification, implications of GST on food bakery, taxability treatment for in-store consumption, takeaway orders, and availability of the Composition scheme for bakeries under GST law.

Applicable GST Rates for Various Bakery Products

Usually, bakery products are broadly covered under the 1905 HSN code and taxable at GST rates of 5% or 18%. We have tabulated below the applicable Cake GST rate, Bread GST rate and HSN codes for bakery products:

Taxability of Takeaway Bakery Orders

Odisha Appellate Authority for Advance Ruling (AAAR) in the case of Pioneer Bakers laid out that the supply of bakery products sold on a takeaway basis would be treated as a supply of goods. Since such items are usually prepared at the bakery workshops and kept ready for sale at bakery outlets. Also, customised orders are pre-prepared at the workstations and not at outlets. The bakery outlets merely keep the already prepared items available for sale. Hence, GST on bakery products in India sold as takeaway orders is levied on an itemised basis.

Can Items Supplied by Bakery Outlets for In-Store Consumption Be Termed as Restaurant Service?

As per the above-mentioned Advance Ruling of Odisha AAAR the bakery outlets where bakery products such as cake, pastries, muffins, cupcakes, etc. are usually kept on ready to supply basis. For carrying out celebrations at the premises or in-store consumption as well, the bakery outlets provide readily available cakes or pre-ordered cakes prepared at their workshops. Consequently, such bakery outlets cannot be termed as restaurants.

Therefore, the supply by a bakery outlet for in-store consumption cannot be classified as a restaurant service defined in Notification No. 20/2019 – Central Tax (Rate) dated 30 September 2019. Further, the supply of such items will be treated as a supply of goods. As a result, there is no option of the Composition Scheme for bakeries under GST law  [i.e., to pay GST at 5% without availing of input tax credit (ITC)] as available to restaurants and outdoor caterers.

Taxability of Items Supplied with Cake Such as Knife, Candles, Decoratives ETC

As per the above-mentioned Advance Ruling of Odisha AAAR items such as candles, knives, birthday caps, celebration tags, decoratives, etc. supplied along with the cake cannot be termed as Composite Supply defined under Section 2(30) of the CGST Act because such items are neither naturally bundled nor supplied in conjunction with cake in the ordinary course of business. 

Therefore, the rate of GST on cake and pastries will be different from the rates applicable on other items supplied along with the cake will be different.

What Is the Taxability of Brownie Ice Cream?

As per Circular No. 164/20/2021-GST dated 6 October 2021, ice cream parlours sell already manufactured/prepared ice cream and are not involved in any aspects of cooking / preparing the same while providing service. Further, the activity of selling ice cream by ice cream parlours entails a supply of goods and not a service, even if certain elements of services are present.

From the above, we can say that brownie ice cream served by the bakery outlets would be termed as the supply of goods and not a service though there is the presence of certain elements of services. During the ordinary course of business, brownies and ice cream are goods that are not naturally bundled or supplied in conjunction with each other. They are supplied together as a combination in case of the sale of brownie ice cream and as a result, the supply of brownie ice cream will be covered under the definition of Mixed Supply as provided under Section 2(74) of the CGST. Further, as per Section 8 of the CGST Act, such supply will be treated as the supply of an item attracting the highest rate of tax. Therefore, the supply of brownie ice cream will be treated as the sale of ice cream (HSN code: 21050000) and taxable at 18%.  

GST on Sale of Other Products Prepared at Bakery Workshops

Uttarakhand AAAR in the case of M/s Kundan Mishtan Bhandar held that the supply of food items such as sweetmeats, cold drinks, and other edible items from the sweetshop which also runs a restaurant can be treated as a restaurant service if they maintain separate billing counters and records for the restaurant and sweet shop.

From the above, we can derive that the products such as sandwiches, rolls, burgers, samosas, etc. pre-cooked at bakery workshops for supply through the restaurants run by bakery outlets can be treated as restaurant service. Therefore, there is the benefit of the Composition Scheme for bakeries under GST law to pay GST at 5% without availing any ITC i.e., benefits available to restaurants and outdoor caterers. Further, such benefits can be availed only if separate billing counters and records are maintained for such restaurants. In this scenario, the takeaway service provided by these restaurants will also come under the preview of restaurant service as clarified in the above-mentioned Circular.

However, one may take a view contrary to the above as laid down in the above-mentioned Advance Ruling of Odisha wherein it was held that the supply of other food items prepared in advance will not be classified as a supply of restaurant service since the bakery outlets are not involved in preparations of such food items. Therefore, the rate GST on food in bakery outlets whether supplied for in-store consumption or takeaway basis will be termed as supply of goods.

Conclusive Summary

At present, the various aspects of supply by the bakeries such as the supply of bakery products and other food items for in-store consumption or takeaway, and availability of the Composition scheme for bakeries under GST law, require clarity from the government. The need for such clarifications has arisen on account of integrations of multiple businesses (i.e., restaurant and bakery) and the complexity of the activities performed by bakeries.

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