Mumbai: After cracking down on taxes related to food and delivery charges, the Goods and Services Tax (GST) department is now investigating whether restaurants have evaded tax on packaging charges. Several eateries listed on platforms like Zomato have received summons asking them to disclose GST payments on packaging charges since January 1, 2022. Under GST, in effect since July 1, 2017, service providers collect the tax from consumers and remit it to the government. When customers order through food delivery apps, they typically pay for food, delivery, and packaging. While GST on food is undisputed and the issue of delivery charges is under review, packaging charges have now come under scrutiny. The tax authorities are concerned that while restaurants collect GST on packaging, they may not be passing it on to the government.
GST Confusion Over Packaging Charges Triggers Summons to Restaurants
According to Ashish Karundia, founder of Ashish Karundia & Co, GST law treats combined supply — such as goods packed and shipped — as a single supply where the main item determines the applicable tax rate. From this perspective, packaging charges could fall under the same tax responsibility as food, making e-commerce platforms liable. However, if packaging is itemized separately on invoices, it may qualify as an independent service, making the restaurant responsible for GST on that charge. These varied interpretations have triggered the summons issued over the past few months.
Dinesh Agrawal, co-head of indirect tax at Khaitan & Co, noted that food deliveries through apps are already taxed in the hands of the platforms. The debate now is over whether packaging is a composite part of the food service or a distinct supply. Apps argue that packaging is separate and restaurants should pay the tax, while authorities believe it’s part of the overall service. To clarify the issue and assess potential underpayment, the department is investigating and has begun issuing summons to restaurants.
Packaging GST Row Deepens Amid ₹803 Crore Tax Demand on Zomato
A typical food order costing ₹1,000 with ₹100 each for delivery and packaging comes to ₹1,260 after adding 5% GST. The platform retains GST and its commission before transferring the balance to the restaurant. The question remains: who should pay GST on packaging? The dispute follows an ₹803 crore demand on Zomato and hinges on responsibilities outlined in Section 9(5) of the CGST Act.
Summary:
The GST department is probing whether restaurants have evaded tax on packaging charges. Summons have been issued to eateries on platforms like Zomato. The dispute centers on whether packaging is part of food service or a separate supply, amid a broader ₹803 crore tax demand on Zomato.
