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Swiggy, Zomato orders to cost more from Jan 1; check by how much your food orders could get expensive

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Highlights:

  • Food ordering from platforms including Swiggy and Zomato may become costlier soon.
  • From January 1, Zomato and Swiggy will need to pay the 5 percent GST to the government directly.
  • This GST is currently collected and deposited by restaurants on these food-ordering platforms.

Food ordering from platforms including Swiggy and Zomato may become costlier soon as they will be required to collect and pay tax on behalf of all restaurants starting January 1, 2022. The new move comes as a result of the update issued by the finance ministry under which food aggregators are directed to pay five percent of Goods and Services Tax (GST) for cooked food orders through their platforms.

The government believes this move will curb tax evasions by restaurants, which, before the new GST rules come into effect, are responsible for collecting and depositing GST. Restaurants charge their customers GST on each order placed through food delivery apps but fail to pay taxes to the government. Transferring the onus to food aggregators is aimed at minimizing this practice.

How will this impact food delivery platforms?

  • 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.
  • The move may also create some confusion in terms of the applicability of input tax credits, for which food aggregators are expected to seek clarifications from the government.
  • As a result of the move, the smaller restaurants that did not pay GST so far will have to renegotiate contracts with food delivery platforms to accommodate the changes caused by the new GST regulation
  • Zomato and Swiggy, have also reached out to the government and sought clarification around the recent decision to treat them on a par with restaurants under the GST framework.
  • The companies seek clarity around how the GST would be levied and whether this could lead to “tax cascading” or problems in claiming input tax credits. 

Revenue Secretary Tarun Bajaj said:

“Suppose you order food from the aggregator, and 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. There is no new tax.” Therefore, this rule will have no impact on customers as there is no extra or new tax being collected. Customers used to pay 5% GST and they continue paying the same. The new rule has only changed the point where tax will be collected.

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