Food delivery services from apps like Zomato and Swiggy are likely to see Goods and Services Tax (GST) levied on their services. 

A proposal to levy GST on food delivery services offered by e-commerce operators (ECOs) is due for discussion in the upcoming meeting of the GST council on 17 September.

The Fitment Committee of the GST council has proposed a clarification that serving food, door delivery and takeaway by cloud kitchens are covered under “restaurant service”.

The online firms have been given two proposals. Under the first proposal, ECOs will be notified as “deemed suppliers” under two categories: restaurant to ECO with a 5 per cent tax rate without input tax credit (ITC) and 18 per cent with ITC and the other from ECO to the customer with a 5 per cent with limited ITC.

As per the second proposal, ECOs will be notified as aggregators and a rate will be fixed at a later date. This will make the ECOs pay GST for all supplies made for restaurant service.

According to sources, once approved by the GST council, the ECOs will get three months to implement the changes in their software.

The GST committee will be taking the matter for discussion at its meeting on Friday. 

Notably, the panel discerned that there are no specified legal criteria that would recognize what might qualify as a restaurant or eating joint.

The committee further states that a “restaurant service is defined as (vide Notification No.11/2017 — CTR as amended by Notification No. 20/2019-CTR dated 30.09.2019) as supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied."

As per the explanation, the committee said that the restaurant service, eating joints that also constitutes mess and canteen and service providers are classified under the 'restaurant' category. Meanwhile, cloud kitchens are commonly categorised as delivery services without eating joints, though some do offer a sit and eat facility to customers. 

Having said that, the classification of service pronounces that “restaurant service includes services provided by restaurants, cafés and similar eating facilities including takeaway services, room services and home delivery of food.”

The committee had gone through the E-commerce Sectoral Study of Suppliers that engages with food delivery before it came up with the suggestions. 

Sources with the government said that apps like Zomato are enlisted as tax collectors at source (TCS) and they don't complete required GST enrollment checks in restaurants that are not a part of the GST framework but rather are essential for their store network.



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