If you plan to celebrate the New Years tomorrow by ordering food through platforms like Swiggy and Zomato, don't be surprised if they ask you to pay more. Because, starting tomorrow, changes to the Goods and Services Tax (GST) will take effect, and food delivery platforms like Swiggy and Zomato are required to collect and pay GST on behalf of all restaurants.
As is always the case with tax changes in India, there is a bit of confusion on this one too.
Currently, all prepared meal orders sold by restaurants (through food aggregators) invite a GST of 5%. This is in addition to the 18% GST charged on all restaurant food. So far, the burden of paying 5% GST has fallen on restaurants. Now that responsibility has changed for food delivery platforms.
What is the real change? Has a new tax been collected?
The proposal to order food delivery platforms to collect and pay 5% GST on food orders directly to the government was announced last September at the GST Council meeting.
The decision was made to match online food deliveries with prepared meals sold by restaurants. The government has made it clear that no new taxes have been introduced and that this is simply the transfer of the GST collection center.
To clarify: at this time, if a customer places an order at a restaurant using platforms such as Swiggy or Zomato, the online catering app is supposed to collect the 5% tax on the customer's order and pass it on to the restaurant that it will make the government pay. . Now, food delivery apps will collect the same tax from customers and submit it directly to the government.
Why this change?
The decision was made to prevent revenue leakage from unregistered restaurants. Many restaurants are not registered because they are below the threshold of Rs 40 lakh of turnover per year.
Additionally, restaurants charge their customers GST for each order placed through the food delivery app, but do not pay the tax to the government. Delegating responsibility to food aggregators aims to reduce this tax evasion. The government is estimated to have lost revenue of around Rs 2000 billion so far due to lost revenue.
While Swiggy or Zomato cannot charge you a fee on the TPS panel, they can charge a fee that justifies the additional work. And that's where your fear comes from that your online food orders are expensive.
Some clarity should emerge based on the decision that food application companies make.
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