Zomato | Swiggy: Tipping point: New GST rules to complicate tax on tips, surge fees or extra delivery charges for Swiggy and Zomato

Meals supply platforms and Swiggy may face Items and Companies Tax (GST) associated issues on suggestions given to supply boys, surge payment, supply payment and packaging expenses charged to prospects.

Going forward the extra monies levied on prospects may additionally face GST for the platforms, say tax specialists.

Not simply that, if the tax is paid at 5% much like what restaurants pay, each Swiggy and Zomato must bear the next price.

Each the businesses previously one week have additionally reached out to their tax advisors to hunt readability round this.

The GST council has mentioned that meals supply platforms reminiscent of Swiggy and Zomato ought to cough up 5% GST similar to eating places.

The tax for the platforms will come into impact from January subsequent yr.

This may imply that Swiggy and Zomato must slap a 5% tax on the entire cost of food.

The query nonetheless is whether or not this may additionally apply to further cash charged when it comes to surge payment, supply payment and packaging expenses.

Chatting with ET, an individual with direct information of the matter mentioned, “This level (GST on surge payment, supply price and so on) was being mentioned. The corporate is seeking to cost 18% GST as an alternative of 5% GST on this price, in order that we will avail the enter tax credit score.”

Eating places are charged 5% GST however they don’t get enter tax credit score on the quantity.

Enter tax credit score is principally GST paid on enter providers or uncooked supplies that may be set off in opposition to a sure form of future tax legal responsibility.

Because of this the GST paid turns into pure price. This may even be the case for Swiggy and Zomato in the event that they pay 5% GST.

“The meals supply platforms have big prices when it comes to expertise and rents and they might need enter tax credit score. The considering is that the tax division too wouldn’t take objection when they’re paying 18% GST as an alternative of 5%,” the particular person near the event mentioned.

Then there’s a query of what occurs to suggestions that prospects willingly give to supply boys.

So far as suggestions are involved, each the supply start-ups must show to the tax division that they’re only a “cross via” between the supply boys and the shopper and each penny is being handed over to the supply boys.

“The guidelines paid by the purchasers to the supply boys don’t characterize any service with respect to the supply of meals and should not be topic to tax as there may be an absence of any exercise,” mentioned Abhishek A Rastogi, companion at Khaitan & Co.

Swiggy and Zomato didn’t reply to an ET question.

As of now, these corporations pay GST solely on the quantity they cost over and above the price of meals. Going forward nonetheless GST will apply on the entire worth of the order.

ET had reported earlier that the restaurant trade is anxious about how the GST on Zomato and Swiggy can be carried out and is planning to achieve out to the federal government on the matter.

The businesses need readability round how the GST can be levied and whether or not this might result in “tax cascading” or issues in claiming enter tax credit, ET wrote on September 23.

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