Swiggy, Zomato to collect 5% GST on deliveries, food not to be hesitating

In its proposal, the GST Council accepted food supply applications such as Zomato NSE -2,92% and Swiggy as restaurants and levied 5% of GST on items it supplied. 

In the main, these applications will now be required to raise 5% GST or goods and services tax, as the Finance Minister, Nirmala Sitharama indicated on Friday night following the meetings of the Council, from customers instead of the restaurant from which they pick up orders.

The end consumers who receive meals from GST registered restaurants would not have an extra tax burden. The fee will however plug unregistered establishments into tax avoidance.

These amendments will apply from 1 January 2022 to allow the operators of e-commerce to make improvements to their software to levy these taxes.

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“Transportation of passengers, by any form of the car (such as 1 January 2022), restaurants services offered through this services is liable to be taxed for e-commerce operators by some exclusions (such as 1 January 2022)” stated a statement of the Department of Finance on the GST Council decision.

“The decision to make food aggregators pay tax on restaurant supplies from 1 January 2012, despite the fact that they had collected food supply taxes to their clients, appears to have been founded on empirical underreporting data from restaurants. It is envisaged that when the restaurant is registered, the impact on the end consumer will be neutral. For unregistered supplies, a GST of 5% may be applicable; “Mahesh Jaising said Deloitte India Partner.

“Typically, the proposal can be put into practice in two ways. Option 1 would charge GST to the food aggregator and not charge GST to the eatery. This is comparable to cab aggregators, and the restaurant would have to have 2 different invoicing systems under this option –

one for supplies at the restaurant and one for supplies via aggregators.

Option 2, GST may continue to be charged by restaurants and the food aggregator is treated as a supplier (and buyer). This would have the same effect as in Option 1, as the tax collection from the food aggregator. The difference was that the food aggregator would have to claim credit “He added. He added.

According to estimations, Rs 2,000 crore in the previous 2 years has been the tax loss to be paid for alleged under-reporting in the food supply aggregates.

New GST registration denial have a serious impact on our economy

The GST presently lists these apps as Tax Collectors at source (TCS).

One of the factors that led to the drafting of such a proposal was that Swiggy/Zomato had no obligatory registration check and that these apps provided unregistered restaurants.