GST on Zomato, Swiggy Orders – Impact On Customers, Restaurants And Food Delivery Platforms
GST on Zomato, Swiggy Orders – Impact On Customers, Restaurants And Food Delivery Platforms?
GST Council in its 45th GST Council Meeting held on September 17th, 2021 at Lucknow, has decided to charge GST at the rate of 5 % on cloud kitchens and food delivery platforms like Swiggy, Zomato, etc on restaurant services supplied through them with effect from 01.01.2022 and the tax will be charged at the point of delivery.
Until Now, food delivery platforms used to collect GST from customers and gave it back to the restaurants. After receiving GST from them, restaurants had to pay the tax to the government. Once the changes are implemented with effect from 01.01.2022, the food delivery companies will collect the tax from customers and deposit it directly to the government on behalf of the restaurant.
Department noticed that this system in place is confusing and even led to the evasion of taxes. Restaurants used to collect taxes but did not pay the taxes to the department.
Food delivery platforms collect TCS on GST at the rate of 1 % on the taxable value of supplies made by restaurants through them and deposit it with the department. The department found a huge gap between the taxable value reported by Food delivery platforms in TCS return filed, and the taxable value reported by restaurants in their returns.
Revenue Secretary Tarun Bajaj said “Analysis – of returns filed by delivery apps and some Haryana restaurant services – showed the gap in taxable turnover for suppliers where TCS was deducted by a delivery app was greater than turnover declared by such suppliers. The evasion amount is believed to be substantial as food delivery apps have high supply volumes”
Impact on customers:
This new rule will have no impact on customers as there is no extra and no new tax. This new rule has only led to change in the point where tax will be collected. Customers will continue to pay GST at the same rate of 5 % as they used to pay earlier.
Impact on restaurants and food delivery platforms:
This new GST rule will impact small restaurants, especially the ones having an annual turnover of less than Rs 20 lakh, as these restaurants were earlier not required to be registered under GST.
Also, after this new rule, there will be an additional compliance burden on most restaurants, as they will have to maintain two separate accounts — one for their regular business done and the second for the business done through Zomato or Swiggy.
As for food delivery platforms, this will also add more burden of compliance towards collecting and depositing taxes on behalf of the restaurants and maintaining additional records.