The GST Council, scheduled to meet on Friday, is likely to consider making e-commerce operators (ECOs) in food delivery such as Swiggy and Zomato liable to pay the Goods and Services Tax on restaurant services supplied through them. This is one of the 54 proposals for rate and rules revision expected to be taken up at the Lucknow meeting.
“If approved, time up to December 31 can be given to these delivery concerns to make changes to their software, etc,” a senior government official told BusinessLine. This proposal is based on a suggestion by an E-Commerce Sectoral Study of Suppliers/ECOs dealing in foods delivery.
These apps are registered as Tax Collectors at Source (TCS). According to the official, one of the reasons for such a proposal is the committee’s observation that there is no mandatory GST registration check by these food-tech companies and there were unregistered restaurants supplying through them.
₹2,000-cr revenue loss
It may be noted that though the rate of tax is low, the revenue missed is significant as food delivery is a flourishing, high volume business. The committee estimated the revenue loss at around ₹2,000 crore.
The official said that data for Zomato and Swiggy were analysed for the October-December 2020 period for Haryana. For Zomato, it was found that the gap in the taxable turnover of suppliers where TCS was deducted by Zomato was greater than the turnover declared by the suppliers ₹ 101 crore. Therefore, the tax evasion amounts to around ₹ 5.20 crore. In the case of Swiggy, the gap in the taxable turnover for suppliers where TCS was deducted by Swiggy was greater than the turnover declared by the suppliers by ₹ 91 crore. The evasion of tax amounting to ₹ 4.5 crore, he said, adding that there is a suggestion for a new mechanism for taxes at the time of supply.
The proposal has two options one, notifying ECOs as aggregators under Section 9(5) of the GST law with the rate being notified later. Under this, an e-commerce operator would become liable to pay the GST for supplies through it. But this option will be limited to restaurant services. Also, it may not be applicable for a restaurant within a hotel where the room tariff is more than ₹ 7,500.
There is the proposal for a separate return where GSTIN-wise details of supply on which tax is being collected and paid by the e-commerce operator will have to be declared. Though there is limit of ₹ 20 lakh for service providers to be registered, here the suggestion is that all restaurant services, irrespective of turnover, are brought under the aggregator category. ECOs may also be made aggregator of delivery services.
The second option is notifying an ECO as a deemed supplier. Here, the supply will be categorised in two legs from the restaurant to the ECO and from the ECO to the customer. For the first, the tax rate will be 5 per cent without input tax credit and 18 per cent with input tax credit. The second leg will attract GST at 5 per cent with limited ITC.