Ordering food from platforms including Swiggy and Zomato may soon become costly as they will have to deposit and pay tax on behalf of all restaurants from January 1, 2022. The new move comes as a result of the update issued by the Finance Ministry. Food aggregators have been directed to pay five percent of Goods and Services Tax (GST) for cooked food orders made through their platform. Experts believe that this update will have an impact on both end consumers and small restaurants. At the same time, platforms including Swiggy and Zomato are also expected to have additional compliance burdens due to the change in the tax regime.
The GST Council in its 45th meeting in September had recommended for food delivery platforms including Swiggy and Zomato to pay GST on behalf of the restaurants on their board. Earlier this month, the finance ministry issued a circular to announce that the new rule would come into effect from January 1.
“Since ‘Restaurant Services’ has been advertised under Section 9 (5) of the CGST Act, 2017, the e-commerce operator (ECO) will be liable to pay GST on restaurant services provided from January 1, 2022, through ECO,” the statement said…
As a result of this update, food aggregators will be responsible for collecting and depositing GST from all restaurants on their platform. This means that a platform will have to keep a separate GST entry for each order received from a restaurant. Additional resources will be required from the platforms to comply with the system
Significantly, the platforms that will have to pay for the delivery of services through their platforms will require five percent above the existing 18 percent GST.
Deloitte’s partner S. “While consumers may increase their e-commerce food bill from January 1, it is expected that the compliance burden of e-commerce food operators will increase significantly,” Money said. India.
The change would force small restaurant owners and food outlets to pay five per cent GST on all orders placed through the online platform. This is expected to affect their earnings and ultimately they will have to charge even more for processed orders through the app including Swiggy and Zomato.
Rajat Bose, a partner at law firm Shardul Amarchand Mangaldas & Co., said, “The GST amendments could have an impact on end consumers as the cost of ordering from smaller restaurants will increase which is still out of GST.”
Tax experts told Gadgets360 that small restaurant owners who fall under the GST limit have an annual income of less than Rs. Under normal circumstances, it would not cost Rs 40,00,000 to pay GST.
Some stakeholders see the update on GST for food supply as positive and a good step towards competition. Government officials have also claimed that the change will help curb tax evasion to some extent as the central revenue department will be able to create taxes by making the online platform responsible for GST deposits which would otherwise have been avoided by restaurants.
“The government has recently changed the responsibilities of Zomato and Swiggy or any other online portal,” said Kabir Suri, president of the National Restaurant Association of India (NRAI). “Customer costs remain the same.”
However, small restaurant owners see this update as a barrier to entry for new players.
Sarabjit Singh, owner of Pizza Corner Sizzle Slices, said the move would affect smaller players in the market and customers of restaurants that are not yet under GST rule due to low sales.
Singh says his restaurant is already paying five per cent GST, the update will complicate things for his team as well as they need to see how much tax can be paid directly through the platform. And they have to pay a portion separately. .
The COVID-19 epidemic has boosted online orders in the country because people are afraid to go out and eat in private. Many small restaurants are started due to high demand. However, the government’s move could prompt street shops and local food corners to explore alternatives.
Gautam Kumar, owner of a street sandwich shop in New Delhi, said:
“It is difficult for people like us to make money on the platform. So, how we will be able to handle the additional 5 percent discount seems like a mystery.
Swiggy and Zomato declined to comment on the article.
In addition to food delivery aggregators, the finance ministry has been mandating a five per cent GST for ride-sharing platforms that carry passengers in any type of motor vehicle from January 1. In the case of cab rides, the platforms are already required to pay GST, but there is no GST Such liability for bike and auto booking.
“While we appreciate the government’s need to raise revenue, we urge the government to reconsider this tax, which will hurt the earnings of auto drivers as well as the government’s digitization agenda,” Uber India said in a statement. Email to gadgets. 360
“Millions of auto drivers across India rely on Uber and other apps for a living. Riders, especially women and adults, prefer to book auto through the app for the safety and convenience that comes with it. But they also value power. This will increase the rent of the tax platform and reduce the demand. In this situation both the rider and the driver will suffer, ”the company said.
It has also been asked whether this tax will bring real revenue benefits to the government.
Uber India said, “As demand pushes the road, revenue from selectively applying GST on online bookings may be meager,” adding that the tax creates an unequal playing field.
Uber had earlier this month filed an application in the Delhi High Court challenging the GST regime on auto-rickshaw services booked through its platform. Similarly, bike taxi platform Rapido has recently approached the Telangana High Court challenging the rules for riding bikes.
Bose said the imposition of GST on auto rickshaw service delivery by cab aggregators is already pending in two high courts, with no stay order so far.