Swiggy, Zomato to collect 5% GST on deliveries, food not to get dearer
The GST Council has approved a proposal to designate food delivery apps like Zomato and Swiggy as eateries and impose a 5% GST on their sales.
This essentially means that these applications would be obliged to collect 5% GST, or Goods and Services Tax, from customers rather than the restaurants from where they pick up orders, according to Finance Minister Nirmala Sitharaman, who spoke after the Council meeting on Friday evening.
End users who order food from establishments that are GST-registered would not be subject to any additional taxes. The levy, on the other hand, will stop unregistered establishments from evading taxes.
The amendments will take effect on January 1, 2022, to give e-commerce businesses enough time to implement software improvements in order to charge the tax.
"With some exceptions, e-commerce operators will be liable to pay tax on the following services provided through them: transportation of passengers by any type of motor vehicle through it (w.e.f. January 1, 2022), restaurant services provided through it (w.e.f. January 1, 2022)," according to a Finance Ministry statement on the GST Council's decisions.
"The decision to make food aggregators pay tax on restaurant supplies beginning January 1, 2022 appears to have been based on empirical data of restaurant underreporting despite having collected tax on food supplies to clients. Where the restaurant is a registered one, the impact on the end consumer is supposed to be neutral. In the future, there may be a 5% GST on supplies made by unregistered businesses "Mahesh Jaising, a partner at Deloitte India, stated.