Chapter 19 - GST Rates & HSN Codes: Bread, Pastry and Other Bakery Products

• Fresh, plain bread is exempt from GST while Items like pastries, cakes, and biscuits have different GST rates based on their composition and packaging.
• Each bakery product is classified under specific HSN codes, determining its GST rate.
• The GST Council periodically revises rates for certain bakery products.
• Understanding these classifications and rates is vital for accurate tax filing and compliance.

The bakery industry in India offers a diverse range of products, from daily staples like bread to indulgent treats like cakes and pastries. With the implementation of the Goods and Services Tax (GST) , it's essential for both consumers and businesses to understand the applicable tax rates and classifications for these products.This guide provides a comprehensive overview of GST rates and Harmonized System of Nomenclature (HSN) codes for various bakery items.

The GST Council periodically revises tax rates to align with market conditions and industry requirements. Over the years, certain bakery and snack products have seen adjustments in their applicable GST rates .

Key GST Rate Changes for Bakery and Snack Items

• Previously, savoury snack items like namkeens, and extruded and expanded snacks (such as chips, puffed rice products, and other packaged savouries) were taxed at 18% GST.
• To provide relief to the food industry and make these snacks more affordable, the GST rate was reduced to 12%.
• This change has positively impacted manufacturers and retailers, making these products more competitive in the market.

• Plain, unbranded bread continues to be GST-exempt under HSN Code 1905 90 10.
• However, branded cakes, pastries, and biscuits remain in the 18% GST slab, as these are considered luxury food items rather than essentials.

• The GST Council has provided further guidance on packaged and ready-to-eat food products, ensuring that food manufacturers and retailers classify their products correctly.
• Ready-to-eat packaged bakery goods, such as chocolate-coated biscuits, gourmet cakes, and pastries, continue to attract 18% GST due to their premium nature.

• Reduction in GST for Namkeens and Extruded/Expanded Savoury Food Products
• Branded vs. Unbranded Bakery Products
• Clarifications on GST for Ready-to-Eat Packaged Foods

Impact of These GST Changes on Businesses and Consumers

• The reduction in GST for some snack items has allowed manufacturers to lower prices, leading to increased sales and demand.
• However, businesses must ensure accurate HSN classification to apply the correct GST rate and avoid tax discrepancies.

• Lower GST on some snack items means reduced prices, making them more affordable.
• Luxury bakery products, however, remain at higher tax slabs, which may slightly affect pricing and demand.

• For Businesses:
• For Consumers:

As GST continues to evolve, businesses dealing in bakery and snack products should stay informed about regulatory updates and maintain compliance with tax laws. Keeping track of changes in tax rates ensures smooth operations and helps avoid unexpected financial implications.

When dealing with GST on bakery products, it’s essential to understand three key aspects: HSN codes, applicable tax rates, and compliance requirements. These factors determine how bakery goods are classified, taxed, and regulated under GST.Let's break them down in detail:

HSN Codes: Classifying Bakery Products for GST

HSN (Harmonized System of Nomenclature) codes are an internationally accepted system of product classification. Under the GST regime in India, bakery products fall under HSN Chapter 19 (Preparations of Cereals, Flour, Starch, or Milk; Pastry Cooks' Products), specifically HSN Code 1905 for baked goods.Each bakery product is assigned a unique HSN code based on its composition and processing. For instance:

• Plain, unbranded bread is classified under HSN Code 1905 90 10 and is exempt from GST.
• Cakes, pastries, and sweet biscuits fall under HSN Code 1905 and attract 18% GST.
• Rusks and toasted bread fall under HSN Code 1905 40 00 and attract 5% GST.

These codes help standardise taxation across different categories of products and ensure clarity in determining tax liability.

Based on their HSN classification, bakery products attract different GST rates. The GST Council determines these rates, ensuring fair taxation across different product categories.

• 0% GST (Exempted) : Applies to plain, fresh, unbranded bread sold without preservatives or added flavours.
• 5% GST : Applies to rusks, toasted bread, and some plain biscuits.
• 12% GST : Some savoury and ready-to-eat extruded/expanded products have seen GST reductions.
• 18% GST : Applies to cakes, pastries, chocolate biscuits, and premium bakery items.

The tax rate depends on factors like ingredients, branding, packaging, and whether the product is ready-to-eat. Branded and packaged items often attract higher GST than unbranded, loose products.

GST Compliance: What Businesses Must Follow

For businesses, adhering to GST regulations is crucial to avoid penalties and maintain compliance. The key requirements include:

• Accurate Classification : Businesses must use the correct HSN code to apply the appropriate GST rate. Misclassification may result in penalties and tax liabilities.
• GST Registration : If a bakery's annual turnover exceeds ₹40 lakh (₹20 lakh for certain states), GST registration is mandatory.
• Invoicing and Tax Collection : GST-compliant invoices should be issued, with HSN codes and applicable tax rates clearly mentioned.
• GST Return Filing : Businesses must file periodic GST returns, such as GSTR-1, GSTR-3B, and GSTR-9, to report tax collection and input tax credits .
• Input Tax Credit (ITC) : Registered businesses can claim ITC on raw materials and services used in baking (e.g., flour, dairy products, packaging materials).

Failure to comply with GST rules can result in fines, back taxes, or even legal action by tax authorities.

Below is a detailed table outlining the HSN codes and corresponding GST rates for various bakery items:

Understanding the GST rates and HSN codes for bakery products is essential for both businesses and consumers.With different tax slabs based on product type, packaging, and ingredients, staying informed about GST regulations helps businesses price their products correctly and file taxes accurately. Consumers can also make informed purchasing decisions by knowing the tax implications of various bakery items.Since GST rates are subject to periodic revisions by the GST Council, businesses must stay updated on any changes to ensure compliance and avoid penalties. Consulting a tax professional or referring to the latest notifications from the CBIC website is the best approach to staying compliant with GST regulations. Calculate your GST liability effortlessly with our GST Calculator and ensure accurate tax compliance for bakery products.