New Delhi: Online food delivery apps such as Zomato and Swiggy will now have to pay good and services tax (GST) to the government for deliveries made by them. Does this mean extra tax burden for customers? Let’s find out.
Finance Minister Nirmala Sitharaman on Friday addressed a press conference to reveal the decisions taken at the hours-long GST Council meet held in Lucknow earlier in the day.
While making the announcements, the Finance Minister said that food delivery apps like Zomato and Swiggy will collect five per cent GST from consumers instead of the restaurant they pick up orders from.
The GST Council has approved proposal to treat food delivery apps as restaurants. The government officials also informed that the changes will be effective from January 1, 2022 to allow the e-commerce operators time to make changes in their software for such tax to be charged.
However, customers need not worry as there would be no extra tax burden on the end consumers taking food delivery from restaurants registered with the GST.
Currently, bills generated by food aggregators like Zomato and Swiggy already have a tax component that is paid to restaurant partners who then have to pay this amount to the government.
As of now, the restaurant partners pay 5 per cent GST on food bill, while the food delivery aggregators pay 18 per cent GST on the commission it charges the restaurants for providing delivery.
There is no new tax on Swiggy and Zomato, Sitharaman said adding that the GST collection point was simply being transferred.
“Suppose you order food from the aggregator… now the restaurant is paying taxes. But we found some restaurants were not paying. We are now saying that if you order the aggregator will collect from the consumer and pay to the authorities instead of the restaurant doing this,” Revenue Secretary Tarun Bajaj clarified.
As per estimates, the tax loss to the exchequer due to alleged under-reporting by food delivery aggregators is Rs 2,000 crore over the past two years. Under the GST, these apps are currently registered as Tax Collectors at Source (TCS).
Another reason behind implementing the proposal was that there was no mandatory registration check by Swiggy or Zomato and there were several unauthorised restaurants operating through such food aggregators.