Food orders on platforms such as Swiggy and Zomato may soon become more expensive, as they will have to collect and pay taxes on behalf of all restaurants from 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.
“As the ‘catering service’ has been notified under Article 9 (5) of the CGST Act of 2017, the electronic commerce operator (ECO) is required to pay GST on the catering services provided, from January 1, 2022, via ECO ”, indicates the circular. The update will make food aggregators responsible for collecting and filing GST from all restaurants they have on their platforms. This means that for each order that a platform receives from a restaurant, it must keep a separate GST entry for it. It will take additional resources from platforms to comply with the regime.
Some stakeholders see the update in the GST for food delivery positive and a good move for the competition. Government officials also claimed that the change will essentially help curb tax evasion to some extent as by making online platforms liable for GST deposits, the central revenue department will be able to generate the taxes that restaurants would have avoided otherwise.
“The government has just changed the onus to Zomato and Swiggy, or any other online portal,” said Kabir Suri, President of the National National Restaurant Association of India (NRAI). “The cost of the customer remains the same.”