Food delivery apps Zomato and Swiggy will be liable to pay 5 percent goods and service tax (GST) on restaurant services supplied through them from January 1. They would also be required to issue invoices in respect of such services.
The move was announced by Union Finance Minister Nirmala Sitharaman in September 2021 and means a change of rule for the delivery apps and restaurants.
Here are key things to know about the new GST rule on Zomato, Swiggy:
What is the new rule all about?
According to the GST Council, the food delivery apps will be made liable to pay 5 percent tax on restaurant services provided by them with effect from January 1, 2022. Services provided by cloud kitchens or central kitchens will also come under the ambit of restaurant service and attract 5 percent GST.
As of now, the restaurants were collecting and depositing GST to the government. So, the compliance of deposit and invoice raising has now been shifted to food delivery platforms.
Why is GST Council taking this step?
The GST Council approved this transfer of responsibility of collecting and depositing tax on food aggregators in order to crack down on restaurants that don’t pay taxes. The government had noticed that several restaurants were evading taxes though they were being collected from the consumer.
The government estimates showed that tax loss to the exchequer due to alleged underreporting by food delivery aggregators is Rs 2,000 over the past two years. Making these platforms liable for GST deposits would curb tax evasion.
Will it impact consumer in anyway?
No. This only implies a transfer of responsibility of collecting and depositing the tax and does not mean new taxes were being announced,
So, nothing will change for the consumer. The consumer will continue to pay 5 percent tax on the food ordered through the apps and that would be routed to the government through different channel.
How it will impact restaurants?
Smaller restaurants with an annual turnover of less than Rs 20 lakh will be particularly impacted by the decision. This is because most of these restaurants did not come under the GST ambit, according to experts.
However, they will now need to pay taxes as it would be collected by the aggregator on their behalf.
Once the food delivery apps start depositing tax on behalf of the restaurants, the eateries will also have to mandatorily register themselves under the GST as done by the e-commerce seller.
(Edited by : Aditi Gautam)
First Published: IST