From January 1, food delivery apps will collect and deposit 5 per cent GST with the government. GST Council approved this transfer of responsibility, on Friday. The government proposed bringing several restaurants that had not been paying taxes under the GST net.
Currently, if a customer orders food, from Restaurant X using Swiggy or Zomato. The food delivery platform collects the 5 per cent tax on food from the customer. Meanwhile the rest passes it on to the restaurant. However, the government believes that several restaurants have not deposited their tax . This was despite them recording high turnovers January 1. The food-delivery apps will collect the tax on behalf of the restaurant and will also deposit it on their behalf. As a result of this, the restaurants will also have to mandatorily register themselves as is done by e-commerce sellers.
The consumer will continue to pay the 5 per cent rate on the food they order online.
The proposal of the GST Council, which government approved Friday, also pegged to bring the delivery services under the tax net. Later it determined that since the customer does not directly avail the services of a delivery executive. Also they have the choice of which delivery executive services them. The responsibility for paying the tax on delivery services will lie with the food-delivery apps
This will also increase the burden of compliance towards collecting and accounting for the taxes on behalf of the restaurants.
The move may also create some confusion in terms of applicability of input tax credits. That is- for which food aggregators will seek clarifications from the government. For more updates keep an eye on Artifex.news.
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