GST on e-commerce explained with Restaurant example

With effect from 1st Oct 2018, e-commerce companies like Amazon, Flipkart etc were made liable to collect TCS (tax collected at source) at 1 % ( 0.5% CGST and 0.5% SGST/UTGST). The collection of 1% was mainly for control purposes and balance GST is to be paid by the actual supplier of goods/services.

TCS provisions dealt with under section 52 however some exceptions as mentioned in section 9(5) of the CGST Act. These include taxi services, hotel booking, house keeping (like plumbing and carpentering etc.) and restaurant services. In case of above mentioned exceptions the e-commerce operator ( ECO) is required to pay the GST without collecting any tax at source from the payment to the actual supplier. For cases covered in section 9(5) the ECO is treated as a supplier liable to pay GST instead of the actual supplier.

Focus on example of Restaurant ( was the change tax neutral? not quite..)

On 17th Dec 2021 restaurant services were brought under the coverage of section 9(5) as a result of which ECO like Zomato/ Swiggy were made liable to pay GST. This was interpreted by most of us as a case of increase in tax levies on people ordering food through the food delivery app. If we look at this change in detail we will know that this was not an instance on increasing tax liability. Till 17th Dec 2021, the ECO were expected to collect 1% tax from payments made to the restaurants and restaurants were charging the GST ( net of input tax credit for the TCS already paid). From 17th Dec 2021, the ECOs were made liable to pay tax instead of restaurants for food supplied through these ECOs. However this change may have been brought about to tax the supplies from such restaurants that may not have been paying GST on restaurant services billed by them. By bringing incidence on ECOs the gap that was existing in earlier framework leading to evasion has been fixed.