Zomato | Swiggy: Tipping level: New GST guidelines to complicate tax on ideas, surge charges or further supply fees for Swiggy and Zomato

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

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

Not simply that, if the tax is paid at 5% just like what restaurants pay, each Swiggy and Zomato should bear the next value.

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

The GST council has stated that meals supply platforms akin to 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 12 months.

This is able to imply that Swiggy and Zomato should slap a 5% tax on the full cost of food.

The query nonetheless is whether or not this could additionally apply to extra cash charged by way of surge payment, supply payment and packaging fees.

Chatting with ET, an individual with direct information of the matter stated, “This level (GST on surge payment, supply value and so forth) was being mentioned. The corporate is trying to cost 18% GST as a substitute of 5% GST on this value, 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 companies or uncooked supplies that may be set off towards a sure type of future tax legal responsibility.

Which means the GST paid turns into pure value. This is able to even be the case for Swiggy and Zomato in the event that they pay 5% GST.

“The meals supply platforms have big prices by way of know-how and rents and they’d need enter tax credit score. The considering is that the tax division too wouldn’t take objection when they’re paying 18% GST as a substitute of 5%,” the particular person near the event stated.

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

So far as ideas are involved, each the supply start-ups should reveal to the tax division that they’re only a “move by way of” between the supply boys and the shopper and each penny is being handed over to the supply boys.

“The information paid by the shoppers to the supply boys don’t signify any service with respect to the supply of meals and should not be topic to tax as there’s an absence of any exercise,” stated Abhishek A Rastogi, accomplice 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 full 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 succeed in 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.