Ordering Food Online Will Be Costly From Jan 1: Swiggy, Zomato Hit With GST Rules
Starting 2022, ordering food from online food aggregators like Swiggy and Zomato would get costlier, as these entities would have to pay an overhead Goods and Services Tax of 5% for cooked food orders through their platforms.
This will not only put a price pressure on the aggregators but also on the end customers and small business restaurants, with an annual revenue of not more than Rs 40 lakh.
The addition of 5% GST by food aggregators came after the finance ministry issued a circular to announce the new rule in the 45th meeting of the GST Council in September.
Prices of Ordering Food to Increase
As per a recent update in the GST Laws, held in the 45th meeting of GST Council on Sept 17, 2021, a 5% tax on supplies of restaurant service supplied through e- commerce operators shall be paid by the e-commerce operators, like Swiggy and Zomato.
The circular released by the Dept of Revenue, Finance Ministry noted, “As ‘restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the e-commerce operator (ECO) shall be liable to pay GST on restaurant services provided, with effect from the 1st January, 2022, through ECO”.
This means that food aggregators will now have to collect and deposit GST from all restaurants they have on their platforms. For each order placed on the platform, these bodies will have to keep a separate GST entry for them.
As a result, the brunt of the new tax regime will be borne by end customers as well as restaurants, hitting the low-business small-scale ones the most.
As per Deloitte India, “While consumers are likely to see an increase in their e-com food bills from 1st January, it is expected that there would be a significant increase in the compliance load for e-commerce food operators.”
The change will also force small restaurant owners and food shops to pay 5% for all the orders they get via online platforms.
Another source said, “The GST amendments are likely to impact end-consumers as cost of ordering from smaller restaurants who were hitherto outside the GST ambit will go up if ordered through food aggregators”.
It must be noted that the new 5% GST requirement is in addition to the existing 18% GST that online platforms pay for offering delivery services.