Clipped from: https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/restaurant-industry-wants-clarity-on-gst-on-swiggy-zomato/articleshow/86683003.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis
The GST Council has said that food delivery platforms such as Swiggy and Zomato should cough up 5% GST, just like restaurants.
They are seeking clarity for the price-sensitive smaller restaurants currently exempt from GST that have been getting on boarded on the two platforms post Covid and are wondering if the tax on Zomato and Swiggy would spill over to them. Other operational guidelines also need to be issued for the implementation, they said.
“We would be sending suggestions which should be considered as a lot of operational issues will arise and there must be proper guidelines. How and when would this be implemented? There is also the issue of existing thresholds for GST implications on restaurants under various slabs and how this impacts them” said Pradeep Shetty, joint honorary secretary, Federation of Hotel & Restaurant Associations of India (FHRAI).
The industry wants to know if the smaller restaurants that do not pay GST will have to renegotiate contracts with the two platforms as a result of the move,” a restaurateur familiar with the matter said.
“We are only concerned about the implications on smaller restaurants wherein registration under GST is not mandatory, or they are categorised under the composition scheme, for the purpose of lessening the burden on small businesses,” said Shivanand Shetty, president of the Indian Hotels & Restaurants Association (AHAR).
A person familiar with the matters at Zomato said the company is in touch with the authorities to figure out the implementation. “Conversations with the government are ongoing on how this would work,” the person said. Zomato and Swiggy did not respond to emails seeking comments till the time of going to press.
Tax experts said considering the way the GST framework works, some of the smaller restaurants may see their costs increasing going ahead.
“The last thing which must happen is the increase of cost when the delivery takes place from those suppliers which are currently exempt under the tax system. One way to extend exemption is to specifically exempt when the delivery by the online operator is made with respect to the goods of small suppliers,” said Abhishek A Rastogi, partner at law firm, Khaitan & Co.
As per the current regulations restaurants pay 5% GST, but they do not get input tax credit on that. Input tax credit is basically GST paid on raw materials or procurements that can be set off against future tax liability of a certain kind.
Tax experts say that some of the smaller restaurants and cloud kitchens do not pay GST currently.
The new GST regulations however could mean that they will have to cough up the tax.
In some cases these small restaurants fear that they may have to increase the price, which may also impact their demand.
In some cases Swiggy and Zomato may also have to renegotiate the contracts they have with these restaurants to include the new GST regulation.
Swiggy and Zomato, have also reached out to the government and sought clarification around the recent decision to treat them on a par with restaurants under the GST framework.
The companies want clarity around how the GST would be levied and whether this could lead to “tax cascading” or problems in claiming input tax credits, ET had reported earlier.
The GST council has said that food delivery platforms such as Swiggy and Zomato should cough up 5% GST just like restaurants. The tax for the platforms will come into effect from January next year.
According to the people aware of the development, companies are concerned that the way the tax system works; they could see a jump in their total costs.