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Business Line -Paper Food delivery apps not eligible for ITC under new GST regime Home Style From Jan 1, onus on apps to collect tax, deposit with govt on behalf of restaurants hote ature Paratha Data Sich Samosa los Ceder 02 G zomato SHISHIR SINHA restaurants which are paying New Delhi, December 6 the taxes. The government has E-commerce Operators (ECOs) already clarified this is not a in food delivery space like new tax and there will be no im- Swiggyand Zomato will not get plications on customers. The input tax credit (ITC) under the rate of tax will continue to be 5 new GST mechanism coming per cent with the Finance Min- into effect from January 1. This istry having notified the will be included in the fre- change. However, this will not quently asked questions (FAQs) be applicable in case of restaur- expected to be released soon. ant services supplied from lux- The government has clarified this is not a new tax and there will be "We received representation ury hotels that declare tariff of no implications for customers REUTERS on ITC eligibility and other is- any unit of accommodation sues. Since restaurants paying not less than $7,500 a day. registration check by these crore. Another official said that GST at the rate of 5 per cent are The GST Council recommen- food-tech companies and there data for Zomato and Swiggy not eligible for ITC and only the ded for change on the basis of a were unregistered restaurants were analysed for the October- onus to deposit the GST has suggestion by an e-commerce supplying through them. December 2020 period for changed, there is no possibility sectoral study of suppliers/ Haryana. For Zomato, it was of ITC for food delivery plat- ECOs dealing in food delivery. Estimated revenue loss found that the gap in the tax- forms," a senior Government of- Under the existing system, It may be noted that although able turnover of suppliers ficial told BusinessLine. these apps are registered as tax the rate of tax is low, the rev- where TCS was deducted by Zo- The GST Council, in its meet- collectors at source (TCS). AC- enue missed is significant as mato was greater than the ing on September 17, recom- cording to the officials, one of food delivery is a flourishing, turnover declared by the sup- mended that ECOs in food deliv- the reasons for such a change is high volume business. The pliers 101 crore. Therefore, ery would be responsible for the committee's observation committee estimated the rev- the tax evasion amounts to paying taxes. At present, it is the that there is no mandatory GST enue loss at around $2,000 around +5.2 crore. In 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 amounted to 4.5 crore, he said, adding that there is a sug. gestion for a new mechanism for taxes at the time of supply. Smita Singh, Partner with Singh & Associates said that as a result of the new mechanism, the restaurants will also have to mandatorily register them- selves as is done by e-commerce sellers. "Restaurants will have to bear additional compliance burden and they will have to ac- count for not only their routine business but also now separate books of accounts for the busi- ness done through platforms like Swiggy, Zomato. For the ag- gregators, this will also increase the burden of compliance to- wards collecting and account- ing for the taxes on behalf of the restaurants," she said
