Ordering food online may turn costly as panel moots GST on aggregators

Ordering food online may become costly as the government proposes to bring app-based food delivery services under the Goods and Services Tax (GST) regime.

The proposal is likely to come up for discussion at the GST Council meeting to be held on September 17.

If the government plan sees through, ordering food via e-commerce operators (ECOs) like Swiggy and Zomato will become expensive with effect from January 1, 2022. Food aggregators have come under the tax radar primarily because the Fitment Committee of the GST Council found several restaurants were missing their GST payments. Several food joints/restaurants were found to be not registered under GST.

The committee estimated GST losses from eating and dining business to the tune of Rs 2,000 crore in the last two financial years (2019 to 21) and suggested that food aggregators be made to pay GST on behalf of restaurants they do business with.

The committee, therefore, suggested that door to door delivery of food or takeaway food be put under “restaurant service” category and classified as an e-commerce operator.

The Fitment Committee has recommended two proposals to levying GST on food delivery apps. As per the first proposal, ECOs will be notified as “deemed suppliers” under two categories — from the restaurant to ECO with a tax rate of 5 per cent without input credit and 18 per cent with input credit — and from ECO to the customer attracting 5 per cent with limited Input Tax Credit, India Today reported.

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Restaurants in hotels with tariffs higher than Rs 7,500 will have to pay return with GSTIN-based details of tax being collected and paid by ECOs.

The committee proposes to categorise restaurants under as ‘aggregators’ and ECOs like Swiggy and Zomato as aggregators of delivery services.

If the Fitment Committee’s suggestions get a green signal at the GST Council meeting on September 17, the operators get 90 days to implement the changes and modify their charges accordingly.