Running a restaurant in India involves much more than serving tasty food. There are many rules and legal requirements that restaurant owners must follow. One of the most important parts of this system is the Goods and Services Tax (GST). Within GST, the Harmonized System of Nomenclature, also called the HSN code, plays a very important role. Knowing the correct HSN code for restaurant food items is not optional. It is a legal requirement that helps ensure correct tax filing and smooth business operations.
This comprehensive and detailed guide is created to make things easy to understand. It explains everything you need to know about the HSN code for restaurant food items in 2026.
From understanding what an HSN code is and why it is important, to learning the correct codes for different food items and how GST rates apply, this guide covers it all. Whether you are starting a new restaurant or already running one and need updated information, you will find clear and practical details here.
What Exactly is an HSN Code?
HSN stands for Harmonized System of Nomenclature. It was developed by the World Customs Organization and is followed by more than 200 countries. You can think of it as a common language for products. It helps different countries identify goods in the same way for taxation and trade.
India adopted the HSN system to match global standards and make the GST system simpler. Every product is given a specific HSN code. This code is a number made up of several digits. It helps decide the correct GST rate for that product. For restaurant owners, this means that every item on the menu, from a cup of tea to a full biryani meal, is linked to a specific HSN code.
HSN codes follow a structured format. They are usually 8 digits long and are divided into parts:
- Chapter (first 2 digits): This shows the broad category of the product.
- Heading (next 2 digits): This further narrows down the product type.
- Sub heading (next 2 digits): This gives more detailed information about the product.
- Tariff item (last 2 digits): This provides the most specific classification.
In India, the number of HSN digits a business must use depends on its yearly turnover. However, understanding the complete HSN code structure helps ensure correct classification and accurate GST compliance.
Also Read: How to Start Restaurant Business in India – A Step-By-Step Guide
Why is the HSN Code for Restaurant Food Items So Important?
Many restaurant owners may wonder why they need to worry about codes and numbers at all. However, using the correct HSN code for restaurant food items is extremely important. It directly affects your finances and your legal compliance.
First of all, HSN codes are a key part of GST compliance. The GST rate charged on any food item or service depends on its HSN code. If you use the wrong code, you may end up paying too much or too little GST. Paying less than required can lead to penalties, interest charges and legal notices from the tax department. Paying more than required can lock up your money and affect your cash flow.
Second, every invoice issued to a customer must include the HSN code for the items sold. This helps maintain transparency in the supply chain and allows the government to track sales and tax collection. If invoices are missing HSN codes, they may be rejected. This can cause payment delays, especially when dealing with business customers.
Finally, using the correct HSN code for restaurant food items makes accounting and tax filing much easier. When sales are properly recorded with the right HSN codes, filing GST returns such as GSTR 1 and GSTR 3B becomes simpler and more accurate. It also creates clear records that are useful during audits and for internal financial review.
HSN Codes for Common Restaurant Food Items
At first, the long list of HSN codes may seem confusing. However, restaurant services are usually covered under one main HSN code that includes the supply of food and beverages.
The Main Service Code: HSN 9963
For most restaurants, the most important code to remember is HSN 9963. This is actually a Service Accounting Code, also known as SAC, which is used for services under GST. It covers accommodation, food and beverage services.
Within this category, there are smaller sub codes that describe the exact type of service. For most restaurants, the relevant code is 996331. This code applies to services provided by restaurants, cafés and similar eating places. It includes dine in services, takeaway food, room service and home delivery.
This single code makes GST compliance easier for restaurant owners. Whether customers eat at the restaurant, take food away or order delivery, the service falls under this same category. It covers both the food and the service together, which is how most restaurants operate. As a result, the HSN code for restaurant food items is generally grouped under this service code.
What About GST Rates?
The GST rate for restaurant services under HSN 9963 is usually 5 percent. However, there are some important conditions that every restaurant owner must understand.
- No Input Tax Credit (ITC):
Restaurants charging 5 percent GST are not allowed to claim Input Tax Credit. This means you cannot adjust the GST you pay on raw materials such as vegetables, spices, oil or other business expenses against the GST you collect from customers. The tax paid on purchases becomes a cost for your business. - Location Matters:
The 5 percent GST rate applies to standalone restaurants, cafés and canteens. However, if your restaurant operates inside a hotel where the room tariff is ₹7,500 or more per night, the GST rate on restaurant services increases to 18 percent. In this case, you are allowed to claim ITC.
This difference is very important for financial planning. The option of charging 5 percent GST without ITC was introduced to simplify compliance for small and medium sized restaurants across India.
HSN Codes for Specific Items Sold Separately
HSN 9963 covers food that is prepared and served by your restaurant. But what if you sell items that are not cooked or prepared in your kitchen, such as packaged water, cold drinks or branded snacks?
In these situations, you must use the specific HSN code for those goods and charge GST according to their category. These sales are treated as a supply of goods, not as restaurant services.
Some common examples are:
- Packaged Drinking Water: Classified under HSN Code 2201 and usually attracts 18 percent GST.
- Carbonated Beverages (Cold Drinks): Classified under HSN Code 2202 and attract 28 percent GST plus 12 percent cess.
- Branded Sweets or Snacks: The HSN code depends on the product. For example, chocolates fall under Chapter 18 and potato chips under 2005 20 00. GST rates vary based on the item.
Correctly separating restaurant services from the sale of packaged goods is essential to avoid GST issues. A simple rule to remember is this: if the food is cooked or prepared by you and served to customers, it is a service under 9963. If it is a pre packaged branded item sold as it is, it is treated as goods under its own HSN code.
Also Read: Top 10 Restaurant Trends to Watch in 2025
How to Implement HSN Codes in Your Restaurant Operations
Adding HSN codes to your daily operations is easy when you follow the right steps.
Update Your POS System
Most modern billing and POS systems support GST compliance. Set up your system with the correct HSN or SAC codes for all items. Prepared food should be mapped to SAC 996331 with 5 percent GST, if you are not eligible for ITC.
Separate Billing for Traded Goods
Your POS system should be able to handle multiple GST rates on the same bill. For example, if a customer orders food at 5 percent GST and also buys a cold drink with 28 percent GST plus cess, both items must appear separately on the invoice with correct HSN codes and tax calculations.
Train Your Staff
Billing and accounts staff should understand why HSN codes are important. They must know how to classify items correctly and ensure every invoice is accurate. Small mistakes at the billing counter can lead to bigger compliance problems later.
Regular Audits
Review your sales records and GST returns regularly. A quarterly internal check can help you identify and fix HSN related errors early. This helps keep your financial records clean and audit ready.
Conclusion
Getting the HSN code for restaurant food items right is a core part of operating a restaurant legally and efficiently in India. Although GST classification can seem confusing at the start, it exists to standardise taxation and reduce ambiguity. For most restaurants, compliance is straightforward when you correctly apply SAC 9963 to prepared food and beverage services at a 5 percent GST rate without ITC. At the same time, any packaged or branded items sold across the counter must be treated separately under their respective HSN codes and GST rates.
When your billing system is properly configured and your staff understands how items should be classified, GST compliance becomes a routine process rather than a recurring headache. Accurate HSN usage protects you from penalties, supports clean record keeping and allows your business to scale with confidence.
If managing GST rules and classifications feels overwhelming, professional guidance can save you time, money and stress. Specialists in restaurant accounting can help you implement the correct HSN and SAC codes, streamline tax processes and keep your operations fully compliant. Reach out for expert support and take control of your restaurant finances with confidence and clarity.
Frequently Asked Questions (FAQs)
1. Which tax code applies to restaurant services?
Restaurants do not use a product based HSN code for cooked food. Instead, they fall under a Service Accounting Code. The applicable SAC is 996331, which covers dine in meals, takeaway orders and food delivery. Under this code, restaurant services are generally taxed at 5 percent GST without the benefit of Input Tax Credit.
2. Do menu items require individual HSN or SAC codes?
There is no need to assign separate codes to each dish on your menu. All food and beverages that are prepared in your kitchen and served to customers are treated as a single composite restaurant service. Whether you sell curries, breads or desserts, everything is covered under SAC 996331.
3. Which code is used for catering services?
Catering services are classified separately from regular restaurant operations. They fall under SAC 996333, which applies to catering provided at events such as weddings, exhibitions, corporate functions and parties. In most cases, catering services are also taxed at 5 percent GST without Input Tax Credit.
4. What are the risks of applying the wrong HSN or SAC code?
Incorrect classification can lead to financial and legal trouble. If a lower GST rate is charged due to a wrong code, the tax department can demand the shortfall along with interest and penalties. Overcharging GST can create customer disputes and refund obligations. Repeated errors in coding may also lead to scrutiny during GST assessments or audits.
5. Does the GST rate change for restaurants operating inside hotels?
Yes, the applicable GST rate depends on the hotel room tariff. If the declared room tariff is below ₹7,500 per night, restaurant services are taxed at 5 percent without ITC. If the room tariff is ₹7,500 or above, the GST rate increases to 18 percent, and the restaurant becomes eligible to claim Input Tax Credit on expenses.
6. Are HSN or SAC codes compulsory on customer invoices?
For businesses with an annual turnover exceeding ₹5 crore, mentioning a 4 digit HSN or SAC code on B2C invoices is mandatory. For businesses below this threshold, HSN codes are compulsory for B2B invoices but may be optional for B2C invoices. Even when optional, including the code helps maintain clarity and reduces the risk of compliance issues.
7. Where should I check the correct and updated HSN codes?
The GST tariff and detailed code lists are published on the CBIC website. Referring to official government sources ensures you apply the correct and most up to date HSN code for restaurant food items.
