Now the GST council has finally made a decision for charging online food delivery operators such as Zomato and swiggy GST tax even as it extended concessional tax rates on certain coronavirus drugs by three months till December 31st. According to finance minister Nirmala Sitharaman, now these giant food delivery platforms only have to pay GST on the basis of restaurant services that are supplied through them and the paid tax will be charged at the point of delivery. The union finance minister Nirmala Sitharaman said that this 5% GST will be levied at an exact point where all the food deliveries are made by Zomato and swiggy.
The earlier tax was actually paid by the restaurants but from now on the aggregators such as swiggy and Zomato will continue to pay the tax. This was informed by the GST council as they took the final decision. According to the finance minister Nirmala Sitharaman, this move will definitely help to protect the revenues. Well in GST records these apps are registered as Tax Collected at Source or we can say as TCS.
After the GST meeting, Tarun Bajaj, the revenue secretary informed the date excluding this no other new taxes were announced and this GST collection point was just simply being transferred. The revenue secretary further said that “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…” Further talking about taxes, Tarun Bajaj said that there will be no new tax announced.
After estimating the losses in GST for rupees 2000 crore in 2019 – 2020 and also 2020 and 2021, this fitment panel is now recommending all the food aggregators to be classified as the E-Commerce operators and also to pay 5% GST on the behalf of restaurants. According to some reports, it is said that many restaurants do not deposit any GST and some restaurants are not even registered. Show the rate fitment panel has now asked the change to come into effect from January 1st, 2022. The fitment panel has not given time to all the food aggregators so that they can make their changes in the software.
Well, this will result in the restaurants to maintain separate accounts for sales that are not made through online food aggregators. This may also result in two complex cities for small restaurants.
According to the report of Business Standard, a government official said, “there are no mandatory registration checks by swiggy or Zomato and there are many unregistered restaurants supplying through these food delivery portals.” He further said, “while the rate of tax of 5% is low the volumes are very high which means that the tax evasion is also high.” He further pointed out that how much food aggregators and the supply of food through online platforms have increased during this covid-19 pandemic.
The GST Council may also take up the taxes of cloud kitchens too. Cloud kitchens are only delivery restaurants and do not have any physical space, no dining space, or also any takeaway counter. The fitment panel has decided that these cloud kitchens would be classified as restaurants only and would be taxed at 5% GST without input tax credit and not 18 % GST.
These new GST rules for food delivery platforms such as Swiggy and Zomato were announced at the 45th meeting of the GST council which was conducted on flash Friday. This meeting was charged by finance minister Nirmala Sitharaman and the state finance ministers which happened in Lucknow.