On Friday, the GST Council approved a proposal to treat food delivery applications such as Zomato and Swiggy as restaurants and levy 5 percent GST on supplies made by them. The changes will be effective from January 1, 2022, to allow the e-commerce operators time to make changes in their software for such tax to be charged.

“E-commerce operators are being made liable to pay tax on following services provided through them: transport of passengers, by any type of motor vehicles through it (w.e.f. January 1, 2022), restaurant services provided through it with some exceptions (w.e.f. January 1, 2022),” a Finance Ministry statement on the GST Council's decisions said.

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Deloitte India Partner Mahesh Jaising said, “The proposal of this nature could typically be implemented in two manners. Option 1, the food aggregator would charge GST and the restaurant would not charge GST. This would be similar to cab aggregators and under this option, the restaurant would need to have two separate invoicing systems – one for supplies in the restaurant and the other, through aggregators. Option 2, could be that the restaurants continue to charge GST and the food aggregator be treated as a deemed supplier (and buyer). This would have the same impact of tax recovery from the food aggregator like in Option 1, with the variance being that credit would need to be claimed by the food aggregator.” 

Expected Change: 

From January 1, 2022, the food delivery applications would receive the 5 percent GST from the customers and would deposit it to the government on the behalf of the restaurants or hotels. This decision has come into effect after several restaurants have not deposited the GST despite recording high turnover. 

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Customers:

The customer would not be affected by this new change, they would as usual pay the 5 percent GST on the ordered food. 

Restaurants and Food Delivery apps:

As per the experts, the change would highly impact the small business and it would be a burden for large restaurants as they will have to keep two separate books of accounts — one for their normal business and the second for the business done through Zomato or Swiggy.

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