Swiggy and Zomato Seek Clarity from Government Amid GST Council Decision

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The online food delivery aggregators Zomato and Swiggy have approached the government seeking clarification on the Good and Services Tax (GST) Council decided to charge GST on food delivery services. They seek clarity on how GST would be levied and whether it would lead to tax cascading or issues in claiming Input Tax Credits (ITC).

Currently, the GST is being paid by restaurants. However, the Council decided in its 45th meeting to treat food delivery companies on par with restaurant services and tax them accordingly. According to the GST Council, food delivery apps will have to collect and deposit 5% GST with the government, instead of restaurants, for deliveries made by them from 1st January 2022.

The government has claimed that since no new tax has been introduced, the overall cost for the consumer will not increase since they will continue to pay the 5% tax on food ordered online.

However, the food delivery companies are concerned about the rise in their total cost following the GST Council’s decision. The food delivery companies such as Zomato, Swiggy, and Food-Panda might face challenges due to the absence of ITC and other practical complications.

Also like: Consolidated E-way Bill Under GST | Essential Conditions & Benefit

These companies may face tax cascading since GST would be applied on two stages of the supply chain, once by the restaurants and the second time by the delivery platforms. However, the proposal cannot result in tax cascading as the food delivery platforms will recover the GST cost from the final consumer.

The food delivery companies hope that the department will clarify this proposal soon to get ample time to make changes to their system and comply with the law.

News Team

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