gst-council-to-cut-tax-on-online-food-delivery-charges-to-5

The 55th GST Council meeting, scheduled for December 21 in Jaisalmer, Rajasthan, could bring a reduction in taxes for consumers ordering food through e-commerce platforms by lowering goods and services tax (GST) on delivery charges.

The tax cut will be applicable retrospectively from January 1, 2022, according to the report.

The GST Council might bring a cheer for food delivery apps such as Zomato and Swiggy as reports suggest that they might be receiving a cut in payable Goods and Services Tax.

According to a report, the council might slash the GST on food delivery charges to 5 percent. Currently the tax slab that it falls under is 18 percent.

The tax cut here reflects that the food delivery companies will no longer be eligible to claim input tax credit while filing their GST. However, it is a huge demand fulfilled by the government, as the industry has been asking to be brought at par with the restaurants concerning GST rates.

 

Relief for GST notice to Zomato?

Recently, Zomato received a tax notice for payment of nearly Rs. 804 crore in taxes and penalties for the period of 2019-22. For the claim by the CGST authorities in Thane, Maharashtra to be settled, the proposed tax cut comes into effect.

Sources said that the notice sent to Zomato pertains to the non-payment of GST on delivery charges for the period between October 29, 2019, and March 31, 2022, only being applicable to the last three months of the period in notice, as it is only proposed to come into effect from January 1, 2022. 

 Thus, there is almost no relief for Zomato in this case even if this proposal is cleared.

 

The only relief Zomato may receive would be for the last three months of that period, where GST would be paid at 5% without ITC instead of the current claim at 18%.

 

GST without ITC on delivery charges

 

Sources say a GST rate of 5% without ITC on delivery charges might seem like a reduction for consumers. However, for e-commerce platforms, the case is different.

 

While paying 18% GST allows operators to claim significant ITC benefits, the 5% rate without ITC could, in some cases, lead to a higher overall tax burden.

 

As per sources, for some operators, the total tax outgo at 5% without ITC may even exceed what they pay at 18% with ITC. 

Now, all eyes are on whether the proposal will be cleared and, if so, what it will mean for consumers, e-commerce platforms, and the government.