Soon, You May Have To Pay Extra Money On Your Food Order From Zomato, Swiggy: Here's Why

There could be bad news for foodies who frequently order from online food delivery platforms like Zomato and Swiggy. Food delivery services offered by app-based e-commerce operators (ECOs) may soon attract Goods and Services Tax (GST).

The Goods and Service Tax Council may deliberate on including food delivery apps such as Zomato and Swiggy within the ambit of restaurant services and make them liable to pay the tax.

Suggestion made by the Fitment Committee

Cloud kitchens may also be included within the ambit and be charged a 5% GST, as per the recommendations that the council could take up at the meeting scheduled to be held on September 17.

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At the upcoming GST Council meeting on Friday, a proposal to levy GST on restaurant delivery services offered by ECOs such as Swiggy and Zomato will be discussed.

The suggestion has been made by the Fitment Committee of the GST Council. The committee has proposed that it should be clarified by way of a circular that serving of food, door delivery and takeaway by cloud kitchens/central kitchens are covered under ¡°restaurant service".

The fitment committee noted that while online food ordering through food delivery apps had increased during the pandemic, the government was not getting proportional revenue from taxes.

Two options proposed by GST council

The committee has proposed two options.

The first one involves notifying ECOs as ¡°deemed suppliers¡± under two categories ¡ª from the restaurant to ECO with a tax rate of 5 per cent without input credit and 18 per cent with input credit ¡ª and from ECO to the customer attracting 5 per cent with limited Input Tax Credit.

The second proposal is to notify the ECOs as aggregators and fixing the rate later. With this move, ECOs would have to pay GST for all supplies made for restaurant service.

Representational

However, to tackle the problem ¡ª this may not apply to the restaurants in hotels with tariffs higher than Rs 7,500 ¡ª there is a proposal for a separate return with GSTIN-based details of tax being collected and paid by ECOs to be declared.

¡°This change may be given effect from January 1, 2022, so as to allow the ECOs time to make changes to their software etc,¡± the committee added.

Since there is a Rs 20 lakh base limit for service providers to get registered, the proposal is to include all restaurant services under the category of ¡®Aggregator¡¯ and ECOs as aggregators of delivery services.

The challenges

Interestingly, the committee observed that there are no specified legal criteria to identify as to what would qualify as a restaurant or eating joint. It states that the word ¡°restaurant service is defined as (vide Notification No.11/2017 ¡ª CTR as amended by Notification No. 20/2019-CTR dated 30.09.2019) as supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

Representational Image/PTI

As per the definition, the committee said restaurant service, eating joints including mess and canteen and service providers are categorised under 'restaurant' category, while Cloud kitchen are typically delivery only models without eating joint.