Delivery apps to pay GST for eating places, compliance burden of small gamers could rise

To stop income leakage from the tax payable by eating places within the nation, the GST Council Friday accepted a proposal to make food-delivery platforms like Zomato and Swiggy chargeable for accumulating and depositing the 5 per cent GST relevant on meals with the federal government, efficient January 1.
Even because the transfer could push tax collections from eating places, it could trigger a rise in compliance burden for eating places in addition to the food-aggregators. Most considerably, tax consultants identified, the transfer could end in eating places having to maintain two separate books of accounts — one for his or her regular enterprise and one for what they provide by way of on-line platforms.

Particularly, the transfer could impression eating places with annual turnover lower than Rs 20 lakh and weren’t liable to pay GST. “In essence, the compliance burden is likely to be shifted to food aggregators. From a consumer perspective, there should not be a material change because consumer will still pay 5 per cent GST on food. Small restaurants, which have less than Rs 20 lakh of turnover, are exempt from GST but if food-aggregators are made responsible, perhaps GST will be applicable on the smaller restaurants too,” Pratik Jain, accomplice, Price Waterhouse & Co, LLP mentioned.
The pandemic proved to be a shot within the arm for food-delivery platforms and the supply phase for eating places with the order volumes for aggregators like Zomato and Swiggy surging to 120 per cent of pre-covid ranges in direction of the tip of final yr, after the preliminary lockdowns. This additionally translated in increased supply enterprise for eating places.

A Gurugram-based govt mentioned the food-delivery corporations are more likely to search conferences with the federal government within the coming week to get clarifications on sure points like how the enter tax credit score shall be relevant. However, the most important red-flag within the course of shall be for eating places choosing the composition scheme, by way of which smaller gamers can do away with GST formalities.
“While food delivery services would constitute e-commerce services, sufficient safeguards need to be taken in subjecting them to GST to ensure that smaller food outlets are protected and consumers do not end up paying more,” MS Mani, Senior Director, Deloitte India mentioned. A senior Finance Ministry official mentioned: “With respect to aggregator, it does not matter whether it is composition or not. It will get excluded from the turnover of the restaurant and aggregator will pay”. “Actually even when they were supplying through Swiggy/Zomato, they should have registered as Swiggy/Zomato to deduct 1 per cent TCS, but it was not happening. These platforms will have to make changes in their systems. It will require some time,” the official added.