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Key Highlights
- 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.
Recent Changes in GST Rates for Bakery Products
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.
How Does GST Work for Bakery Products?
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.
Tax Rates: How GST is Applied to Bakery Products
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.
HSN Codes and GST Rates for Bakery Products
Below is a detailed table outlining the HSN codes and corresponding GST rates for various bakery items:
| HSN Code | Description | Rate (%) | CESS (%) | Effective Date | Rate Revision |
| 1905 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19051000 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products -Crispbread | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19052000 | Bread, Pastry, Cakes, Biscuits And Other Bakers' Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products-Gingerbread And The Like | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19053100 | Bread, Pastry, Cakes, Biscuits And Other Bakerr Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products- Sweet Biscuits; Waffles And Wafers--Sweet B | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 190532 | Waffles And Wafers | 5/18 | 0 | 15/11/2017 - 13/10/2017 | 18% has replaced 28% 5% |
| 19053211 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - - Sweet Biscuits; Waffles And Wafers-- Wa | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19053219 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - - Sweet Biscuits; Waffles And Wafers --Wa | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19053290 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Sweet Biscuits; Waffles And Wafers --Waff | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19054000 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Rusks, Toasted Bread And Similar Toasted | 5 | 0 | 13/10/2017 | 5% |
| 190590 | Other | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Other: Pastries And Cakes | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% | |
| 19059020 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Other: Biscuits Not Elsewhere Specified | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19059030 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Other: Extruded Or Expanded Products, Sa | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19059040 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Other: Papad | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
| 19059090 | Bread, Pastry, Cakes, Biscuits And Other Bakers Wares, Whether Or Not Containing Cocoa; Communion Wafers, Empty Cachets Of A Kind Suitable For Pharmaceutical Use, Sealing Wafers, Rice Paper And Similar Products - Other: Other | 5/18 | 0 | 15/11/2017 13/10/2017 | 18% 5% |
Staying GST Compliant for Bakery Products is Important
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.
FAQS - FREQUENTLY ASKED QUESTIONS
What is the GST rate on iPhones in India?
The GST rate on iPhones in India is 18%. This includes 9% central GST (CGST) and 9% State GST (SGST) when purchased within the same state or 18% Integrated GST (IGST) for interstate purchases. Additionally, imported iPhones attract 18% IGST and customs duties.
What is the HSN code for iPhones under GST?
The HSN (harmonised system of nomenclature) code for iPhones is 8517. This code is used globally to classify mobile phones, ensuring uniform taxation across different regions. It helps determine the applicable GST rate and simplifies trade documentation.
Why are iPhones expensive in India compared to other countries?
iPhones in India are expensive due to multiple layers of indirect taxes, including a 20% basic customs duty (BCD), a 2% surcharge, and an 18% GST. These taxes significantly increase the retail price compared to countries where import duties are lower or non-existent.
Can businesses claim an Input Tax Credit (ITC) on plastic materials?
Yes, businesses can claim ITC on GST paid for plastic raw materials if used for manufacturing taxable goods.
Is GST applicable to refurbished iPhones?
GST applies to refurbished iPhones under Rule 32(5) of the CGST Rules. The tax is calculated on the margin, the difference between the purchase and selling price. For example, if a refurbished iPhone is bought for ₹19,000 and sold for ₹31,000, GST at 18% applies only to ₹12,000.
Are iPhone accessories taxed at the same GST rate as iPhones?
Not always. Accessories, like earphones and chargers, may have different GST rates. If bundled with an iPhone as part of a composite supply, the iPhone’s GST rate of 18% applies. However, accessories like earphones attract an 18% GST if sold separately.
How are customs duties calculated on imported iPhones?
Imported iPhones attract a 20% basic customs duty (BCD) and a 10% social welfare surcharge on BCD. These are added to the assessable value before applying 18% IGST, making imported iPhones significantly more expensive than those assembled in India.
Is there any way to reduce the GST on iPhone purchases?
No direct exemptions exist, but businesses can claim ITC if they use the iPhone for work. Some corporate schemes allow GST refunds on business-related purchases. Buying from duty-free zones or states with lower surcharges may also offer marginal savings.
Does GST apply to iPhones purchased under EMI schemes?
Yes, GST is included in the total price of the iPhone at the time of purchase, even when bought on EMI. The monthly EMI amount includes a portion of the GST-paid price, but no additional GST is levied on EMI payments.
What documents are required to claim ITC on an iPhone purchase?
To claim ITC, the buyer must have a GST invoice with details such as the seller’s GSTIN, invoice number, HSN code (8517), tax amount, and buyer’s GSTIN. The seller must also file GST returns, and the transaction must be reflected in GSTR-2B to be eligible for ITC.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
