GST for Bakery 2026 – Rates, Registration, ITC & Complete Compliance Guide
Complete GST guide for bakeries, cake shops, pastry outlets, bread manufacturers, and home bakers in India. GST 2.0 rates on bakery products (5% on cakes, pastries, biscuits, bread at 0%), HSN codes, composition scheme, ITC rules, and compliance essentials.
Quick Summary – GST for Bakery Business
- GST Rate on Bakery Products (2026): 5% on cakes, pastries, biscuits, rusks, and other bakery wares (reduced from 18% under GST 2.0, effective 22 September 2025). 0% on plain bread and Indian breads.
- GST on Chocolates & Confectionery: 5% on chocolates, sugar-boiled confectionery, jams, and milk-based beverages.
- Registration Threshold: ₹40 lakh for bakery goods (normal states); ₹20 lakh for bakery services. ₹20 lakh / ₹10 lakh in special category states.
- Composition Scheme: Available for bakeries with turnover up to ₹1.5 crore. Manufacturers pay 1% GST; restaurants (with outlet-prepared food) pay 5% GST.
- ITC: Available on raw materials (flour, sugar, milk, eggs) and capital goods for registered bakeries under the regular scheme.
- Dual Supply Classification: Pre-manufactured bakery goods = supply of goods (HSN-based rate); outlet-prepared items like pizzas = restaurant service (5%).
Takeaway: Bakery products now attract a uniform 5% GST on most items, with plain bread at 0%. Pre-packaged goods are taxed as goods; outlet-prepared items are taxed as restaurant service. Correct classification is critical for compliance.
1. Introduction – GST for Bakery Business in India
The bakery industry in India is one of the largest and fastest-growing segments of the food processing sector, with over 3 lakh bakeries and an estimated 15 lakh home bakers operating across the country. From traditional neighbourhood bakeries and cake shops to premium patisseries, bread manufacturers, and home-based baking businesses, this sector contributes significantly to India's food economy.
For bakery owners, Goods and Services Tax (GST) compliance is a critical business function. The 56th GST Council meeting, effective 22 September 2025, introduced landmark reforms under GST 2.0 that unified GST rates for most bakery and confectionery products at 5%, significantly reducing the earlier 18% rate on cakes and pastries. Plain bread and Indian breads were moved to the 0% slab, making them completely tax-free.
However, bakery businesses face a unique compliance challenge – the dual classification of supplies. Pre-manufactured bakery products sold from retail outlets are classified as supply of goods under HSN codes, while items prepared or assembled at the outlet (like pizzas, pastas, and shakes) upon customer order are classified as restaurant service. This distinction directly impacts GST rates, ITC eligibility, and invoicing requirements.
This comprehensive guide covers GST rates on bakery products, HSN codes, registration thresholds, the composition scheme, Input Tax Credit rules, dual supply classification, return filing, and common pitfalls for bakery businesses.
Takeaway: Bakery products attract 5% GST (0% on plain bread). Pre-packaged goods are taxed as goods; outlet-prepared items as restaurant service. Correct classification is the foundation of GST compliance for bakeries.
2. GST 2.0 Rates on Bakery Products (2026)
Under GST 2.0, bakery and confectionery products have a simplified rate structure. The table below summarises the applicable GST rates for various bakery items.
| Product Category | HSN Code | GST Rate (2026) | Old Rate |
|---|---|---|---|
| Plain Bread | 1905 | 0% (Exempt) | 5% |
| Cakes, Pastries, Biscuits | 1905 | 5% | 18% |
| Rusks & Toasted Bread | 1905 | 5% | 5% |
| Chocolates & Cocoa Preparations | 1806 | 5% | 18% |
| Sugar-Boiled Confectionery | 1704 | 5% | 12% |
| Jams, Jellies, Marmalades | 2007 | 5% | 12% |
| Milk-Based Beverages | 2202 | 5% | 12% |
| Extruded Snacks | 1905 | 5% | 12% |
| Outlet-Prepared Items (Pizza, Pasta, Shakes) | – | 5% (Restaurant Service) | 5% |
Key Changes Under GST 2.0 for Bakery Products
Takeaway: Most bakery products attract 5% GST. Plain bread and Indian breads are exempt (0%). Update your billing systems to reflect these rates.
3. GST Registration for Bakeries – Eligibility & Threshold
Under Section 22 of the CGST Act, 2017, registration is mandatory for bakery businesses if the aggregate turnover exceeds the prescribed limit.
| Business Type | Normal States | Special Category States |
|---|---|---|
| Bakery Goods (Manufacturer / Trader) | ₹40 lakh | ₹20 lakh |
| Bakery Services (Outlet-Prepared Food) | ₹20 lakh | ₹10 lakh |
| Home Bakers Selling through Platforms | Assess threshold + platform requirements | Assess threshold + platform requirements |
| Inter-State Bakery Operations | Mandatory regardless of turnover | Mandatory |
Mandatory Registration Cases for Bakeries
Voluntary Registration: Even if turnover is below the threshold, voluntary registration may be beneficial for claiming ITC on raw materials and building business credibility.
Takeaway: If your turnover exceeds ₹40 lakh (goods) or ₹20 lakh (services), GST registration is mandatory. Platform onboarding often requires GSTIN.
4. Step‑by‑Step GST Registration Process for Bakeries
Takeaway: Keep FSSAI license, bakery address proof, and bank details ready before starting the application.
5. Documents Required for GST Registration – Bakery Business
- PAN Card of the business / proprietor / partners.
- Aadhaar Card of all promoters / partners.
- Proof of business address (rent agreement, electricity bill, or property tax receipt).
- Bank account details (cancelled cheque or bank statement).
- FSSAI License (mandatory for all food businesses).
- Bakery ownership or rent agreement.
- Photographs of the bakery premises.
- Digital Signature Certificate – mandatory for companies and LLPs.
Takeaway: Maintain updated FSSAI license and bakery address proof for GST registration.
6. Composition Scheme for Bakeries – Eligibility & Conditions
The Composition Scheme is a simplified GST option for small bakeries. The applicable rate depends on whether the bakery is classified as a manufacturer or a restaurant service provider.
| Bakery Category | Composition GST Rate | Eligibility |
|---|---|---|
| Bakery Manufacturer / Trader | 1% (0.5% CGST + 0.5% SGST) | Turnover up to ₹1.5 crore |
| Bakery Restaurant Service (Outlet-Prepared Food) | 5% (2.5% CGST + 2.5% SGST) | Turnover up to ₹1.5 crore |
Classification for Composition Scheme
- Manufacturer/Trader: If your bakery primarily manufactures or trades bakery goods (cakes, bread, biscuits) without any outlet preparation, you qualify under the "manufacturer" or "trader" category at 1% GST.
- Restaurant Service: If your bakery prepares or assembles food items at the outlet upon customer order (pizzas, pastas, shakes), you qualify under the "restaurant" category at 5% GST.
- Both Categories: If your bakery does both, separate accounting and classification may be required for composition eligibility.
Restrictions under Composition Scheme
- ❌ Cannot make inter-state supplies – Sales must be within the same state.
- ❌ Cannot claim ITC – All input GST becomes a permanent cost.
- ❌ Cannot sell through e-commerce platforms – Bakeries on Swiggy/Zomato cannot opt for composition.
- ❌ Cannot deal in excluded goods – Ice cream, pan masala, tobacco, etc.
Takeaway: Bakeries can opt for composition at 1% (manufacturer) or 5% (restaurant). Choose based on your business model and turnover.
7. Input Tax Credit (ITC) for Bakeries – Rules & Restrictions
Input Tax Credit (ITC) allows bakeries to reduce tax liability by claiming credit for GST paid on raw materials and capital goods.
| Bakery Type | GST Rate | ITC Availability |
|---|---|---|
| Bakery Goods (Manufacturer/Trader) | 5% | ✅ Yes (for goods) |
| Bakery Restaurant Service | 5% | ❌ No (restaurant service) |
| Composition Scheme Bakery | 1% / 5% | ❌ No |
ITC on Raw Materials and Capital Goods
ITC Reversal for Expired Goods
- ❌ Expired Cakes & Pastries: ITC on inputs used in manufacturing expired cakes and pastries must be reversed under Section 17(5)(h) of the CGST Act.
- ❌ Wastage: Inputs lost due to spoilage or wastage may attract ITC reversal.
Conditions for Claiming ITC
- Valid Tax Invoice: Must contain GSTIN, HSN, and tax amounts.
- Receipt of Goods/Services: Claim only after actual receipt.
- Tax Paid to Government: Supplier must have deposited the tax.
- Return Filing: Must be claimed in GSTR‑3B by the due date.
Takeaway: Bakeries selling goods at 5% can claim ITC on raw materials. Bakeries providing restaurant service cannot claim ITC. Expired goods require ITC reversal.
8. Dual Supply Classification – Goods vs Restaurant Service
One of the most critical compliance aspects for bakeries is the dual supply classification. The GST treatment differs based on whether the item is pre-manufactured or prepared at the outlet.
| Supply Type | Classification | GST Rate | ITC |
|---|---|---|---|
| Pre-Manufactured Bakery Goods (Cakes, Bread, Biscuits) | Supply of Goods | 5% / 0% (HSN-based) | ✅ Yes |
| Outlet-Prepared Items (Pizza, Pasta, Shakes) | Restaurant Service | 5% | ❌ No |
| Both from Same Premises | Dual Classification | Separate rates | ITC reversal applies |
- Pre-Manufactured Goods: Bakery products manufactured at the factory and supplied through outlets without further cooking or preparation constitute a supply of goods and attract GST according to their respective HSN classification.
- Outlet-Prepared Items: Items such as pizzas, pastas, salads, and shakes prepared or assembled at the outlet upon customer order qualify as restaurant services irrespective of whether consumed on the premises or taken away.
- Coexistence: Both categories of supplies can coexist from the same premises, provided separate invoice series and proper accounting records are maintained, particularly for compliance with ITC reversal provisions.
Takeaway: Maintain separate invoice series for pre-manufactured goods and outlet-prepared items. This ensures correct GST classification and ITC compliance.
9. GST Returns Filing for Bakeries
Bakeries must file GST returns based on their chosen scheme – regular or composition.
| Return | Description | Due Date |
|---|---|---|
| GSTR-1 | Outward supplies (sales) – regular scheme | 11th of following month |
| GSTR-3B | Summary return with ITC and payment – regular scheme | 20th of following month |
| CMP-08 | Quarterly statement for composition scheme | 18th of month after quarter |
| GSTR-4 | Annual return for composition scheme | 30 June |
| GSTR-9 | Annual return – regular scheme | 31 December |
Key Reporting Requirements
Takeaway: File returns on time to avoid late fees of ₹50 per day and interest on unpaid tax. Report goods and services separately.
10. Common GST Mistakes by Bakeries & Solutions
✅ Solution: Cakes and pastries attract 5% GST under GST 2.0. Update billing systems.
✅ Solution: Plain bread and Indian breads are 0% (exempt). Do not charge GST.
✅ Solution: Maintain separate invoice series for pre-manufactured goods and outlet-prepared items.
✅ Solution: ITC is not available on restaurant service. Claim ITC only on goods portion.
✅ Solution: Reverse ITC on inputs used in expired cakes and pastries under Section 17(5)(h).
✅ Solution: File GSTR-9 by 31 December and GSTR-4 by 30 June.
Takeaway: Correct rate application, proper classification, and timely filing are the keys to error-free compliance.
11. Penalties & Risks for Non‑Compliant Bakeries
Takeaway: Apply correct GST rates and maintain proper classification records to avoid penalties.
12. Industry‑Specific GST Insights for Bakeries
5% GST on most products, 0% on bread. Register if turnover exceeds threshold. Composition at 1% (manufacturer).
5% GST on cakes, pastries, and chocolates. Separate classification for outlet-prepared items. ITC on raw materials.
0% GST on plain bread. 5% on rusks and toasted bread. ITC on flour, packaging, and capital goods.
5% GST on cakes and pastries. Register if turnover exceeds threshold or for platform onboarding. FSSAI license required.
Dual classification for goods and restaurant service. Separate invoice series required. ITC reversal for restaurant portion.
Franchisee pays royalty to franchisor (18% GST). Franchisee charges 5% GST on bakery products.
Takeaway: Tailor your GST compliance based on your bakery type – manufacturer, patisserie, bread manufacturer, or home baker.
13. Comparison: Regular vs Composition Scheme for Bakeries
| Parameter | Regular Scheme | Composition Scheme |
|---|---|---|
| Turnover Limit | No limit | Up to ₹1.5 crore |
| GST Rate (Manufacturer) | 5% on goods | 1% on turnover |
| GST Rate (Restaurant) | 5% on services | 5% on turnover |
| ITC Availability | ✅ Yes (goods portion) | ❌ No |
| Inter-State Sales | ✅ Allowed | ❌ Not allowed |
| Platform Sales | ✅ Allowed | ❌ Not allowed |
| Returns | Monthly (GSTR-1, GSTR-3B) | Quarterly (CMP-08) + Annual (GSTR-4) |
Takeaway: Regular scheme offers ITC and flexibility; composition suits small, intra-state bakeries without platform sales.