Swiggy and Zomato may become costlier soon as they will be require to collect and pay tax on behalf of all restaurants starting from 1st January, 2022. This new move comes as a result of the update issue by the finance ministry under which food aggregators are direct to pay 5% of Goods and Services Tax (GST) for cooked food orders through their platforms.
Experts believe that the update will impact both end consumers and small restaurants.
Swiggy and Zomato are also expect to have additional compliance load due to the change in the tax regime.
The GST Council in its 45th meeting in September recommend compliance for food delivering platforms including Swiggy and Zomato to pay GST on behalf of restaurants they have on board.
The finance ministry issue a circular to announce that the new rule will come into effect starting from 1st January 2022.
The update will make food aggregators liable for collecting and depositing GST from all restaurants they have on their platforms.
That means for each order a platform gets from a restaurant, they need to keep a separate GST entry for them.
It will require additional resources from platforms to comply with the regime.
5% GST requirement will be in addition to the existing 18% GST that platforms need to pay for offering delivery services through their platforms.
The tax will essentially be apply to the price of the food item that platforms are delivering to customers.
The change will also force small restaurant owners and food shops to pay 5% GST for all the orders they get via online platforms.
This expect to impact their income and eventually push them to charge more for the orders they process through apps including Swiggy and Zomato.
Some stakeholders see the update in the GST for food delivery positive and a good move for the competition.
Government officials also claim 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.
Small-scale restaurant owners see the update as an entry-barrier for new players.
The COVID-19 pandemic increased online orders in the country as people were fearful of going out and eating in person.
Many small restaurants also starts due to high demand.
This move by the government may push street shops and local food corners to look for alternatives.
The finance ministry is also making a 5% GST obligatory for ride-sharing platforms transporting passengers by any type of motor vehicles starting from 1st January 2022.
Platforms are already liable to pay GST in case of cab rides, but there are no such obligations for bike and auto bookings.
THANK YOU FOR READING.
