The Goods and Services Tax (GST) Council has decided that food aggregator apps, which will be collecting the tax at the final point of delivery, will pay the GST on restaurant services, Union Finance Minister Nirmala Sitharaman announced on Friday.

“Since the place where food is delivered will be the point where tax is collected, the Swiggy-like operator who will be collecting tax will pay up the GST on it,” the Finance Minister said as she addressed the media after the 45th GST Council meeting Lucknow.

Five percent GST will be levied at the point where the delivery is made by Swiggy and Zomato-like food aggregators. Revenue Secretary Tarun Bajaj, however, clarified that no new taxes were being announced and that the GST collection point was simply being transferred.

This means that food aggregator apps will collect 5 percent GST from consumers instead of the restaurant they pick up orders from.

The move comes against the backdrop of the proposal of the GST Fitment Committee to the Council to make e-commerce operators (ECOs) liable to pay GST on restaurant service supplied through them.

Bajaj explained that the decision was taken as the analysis of some returns implied tax evasion on the part of some restaurants.

Reacting to the development, Abhishek Jain, Tax Partner, EY, said, "The e-commerce operators like Swiggy, Zomato etc. would need to raise their own invoices and deposit GST to the government even if the actual restaurant supplier is not liable to pay GST due to its turnover being below the threshold limit."

He added that the move might help in increasing GST collections from restaurant supplies by shifting the taxing duty on established business players instead of small restaurants.

Other major decisions taken at the GST Council meet, the first physical meet since the COVID-19 pandemic, include an extension of concessional tax rates on certain COVID-19 drugs by three months till December 31. The Council has also decided to not take petroleum products under the ambit of GST yet.

Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP, said the outcome of the GST Council meeting is more on expected lines without any major surprises.

“Levy of GST on Swiggy and Zomato has been referred to GoM (Group of Ministers), which seems to be the right approach since the same requires careful consideration due to the fact that the decision could impact the employment of a large part of the population,” he added.

(Edited by : Kanishka Sarkar)

First Published:Sept 17, 2021 10:24 PM IST