Swiggy, Zomato will charge 5% GST on delivery, food will not be expensive
The GST Council on Friday approved a proposal to treat food delivery apps like Zomato and Swiggy as restaurants and levy 5 per cent GST on the supplies made by them. Such food delivery apps will now require consumers to collect 5 per cent GST, or Goods and Services Tax, and not take orders from restaurants, Finance Minister Nirmala Sitharaman said after the council meeting on Friday evening.
There will be no additional tax burden on the final consumers taking delivery of food from restaurants registered with GST. However, the levy will prevent tax evasion by unregistered restaurants.
The changes will be effective from January 1, 2022 to give time to e-commerce operators to make changes to their software for such taxation.
“E-commerce operators are being made liable to pay tax on the following services provided through them: Transport of passengers, by motor vehicles of any kind through it (with effect from January 1, 2022), restaurant services provided through it with certain exceptions (with effect from January 1, 2022),” said a statement from the Ministry of Finance on the decisions of the GST Council.
“The decision to allow food aggregators to pay tax on supplies made by restaurants with effect from January 1, 2022, despite collecting tax on supplies of food to customers, appears to be based on empirical data of under-reporting by restaurants. Impact on End Consumers, Deloitte India partner Mahesh Jaising said, “Where the restaurant is registered, it is expected to be neutral. There could be a further 5 per cent GST for unregistered supplies.”
“A proposal of this nature can generally be implemented in two ways. Option 1, the food aggregator will charge GST and the restaurant will not charge GST. This will be similar to that of cab aggregators and under this option, the restaurant needs to have two There will be a separate invoicing system – one for supplies to restaurants and the other through aggregators. Option 2, it may be that restaurants continue to charge GST and the food aggregator is treated as a deemed supplier (and buyer). This will have the same effect of recovery of tax from the food aggregator as in option 1, with the difference that the credit will need to be claimed by the food aggregator,” he said.
According to estimates, the tax loss to the exchequer is Rs 2,000 crore in the last two years due to alleged under-reporting by food delivery aggregators.
Under GST, these apps are currently registered as Tax Collectors at Source (TCS).
One of the reasons for designing such a proposal was that there was no mandatory registration check by Swiggy/Zomato and unregistered restaurants were supplying through these apps.
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