LUCKNOW: The GST council in its 45th meeting has decided that online food delivery firms Swiggy and Zomato will now have to pay goods and services tax.
“Yes there was detailed discussion... the place where food is delivered is going to be the point where tax will be collected. They will pay the GST on it,” finance minister Nirmala Sitharaman told the media.
She however clarified that this will be no new tax. She explained that the purpose was to ask food delivery apps to collect and deposit GST with the government, instead of what is currently done by the restaurants.
“With food delivery app under GST, a high level of tax evasion will be curbed. He said that food delivery is a service and therefore ought to be brought under the purview of GST,” CAIT Secretary General Praveen Khandelwal said.
The reasoning given was that many restaurants were not depositing GST with the government, while some were not even registered, Sitharaman said.
“The decision to make food aggregators pay tax on supplies made by restaurants from January 1, 2022 seems to have been done based on empirical data of under reporting by restaurants, despite having collected tax on supplies of food to customers. The impact on the end consumer is expected to be neutral where the restaurant is a registered one. For those supplies from unregistered, there could be a 5% GST going forward. Details on this are awaited,” Mahesh Jaising, Partner, Deloitte India said.
Experts say different food items invite different slabs.
“The proposal of this nature could typically be implemented in two manners. Option 1, the food aggregator would charge GST and restaurant would not. This would be similar to cab aggregators and under this option, the restaurant would need to have separate invoicing system – one for supplies in the restaurant and the other, through aggregators. Option 2, could be that the restaurants continue to charge GST and the aggregator be treated as a deemed supplier (and buyer). Here credit would need to be claimed by the aggregator,” Jaising explained.