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Swiggy and Zomato will have to pay 5% GST from today: What are the new modifications, and how will they affect customers?
Beginning Saturday (January 1), online food delivery companies such as Swiggy and Zomato will be required to pay a 5% goods and services tax due to changes in GST rules. The decision to crack down on eateries that don’t pay taxes was made at the 45th GST council meeting on September 17, 2021.
The services provided by these platforms, as well as cloud kitchens and central kitchens, were classified as “restaurant services” and would be subject to a 5% GST without any input tax credit (ITC), according to the Union finance minister.
What’s new now?
Food delivery platforms will be required to pay a 5% GST on any restaurant services they provide under the new laws. Previously, the restaurants collected and submitted the tax with the government, but now it will be the delivery platforms’ responsibility to pay the tax collectors.
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The government discovered that some eateries advertised on meal delivery platforms were dodging taxes despite the fact that they were being collected from clients.
What is the reason for the changes?
“As’restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the electronics commerce operator (ECO) shall be liable to pay GST on restaurant services delivered, with effect from January 1, 2022,” the finance ministry stated in a circular.
“As a result, the ECOs will no longer be required to collect TCS and file GSTR 8 in respect of restaurant services on which it pays tax under section 9(5),” the statement continued.
Is there a new tax that customers must pay?
The finance ministry has stated that clients who use these sites would not be subject to any new taxes. Only a separate channel to the government would be used to deposit the 5% GST.
According to a report by Livemint, Union Finance Minister Nirmala Sitharaman stated that customers will not be subjected to any new taxes as a result of the adjustments.
Consequences for small eateries and the cost of compliance
According to the National Restaurant Association of India, the move is expected to hurt smaller players, businesses generating less than 20 lakh per year (NRAI). According to the organisation, these eateries were not previously required to file GST, but will now be required to do so as a result of the move, which will put them into the government’s tax net.
It further stated that restaurants’ compliance cost would now be increased because they must still collect GST for dine-ins, takeout, and self-delivery while not having to collect taxes for orders placed through delivery services.