Online food delivery firms Swiggy and Zomato will now be liable to pay good and services tax to the government following a decision taken at the GST Council meet on September 17.
"Yes there was detailed discussion... the place where food is delivered is going to be the point where tax will be collected. They will pay the GST on it," said Nirmala Sitharaman, Minister of Finance said while briefing the media.
"There is no new tax," she added.
The government had been working on a proposal to ask food delivery delivery apps to collect and deposit GST with the government, instead of what is currently done by the restaurants.
Currently, online bills generated by food aggregators already have a tax component in it. However, according to people privy to the practices of these firms, this taxed amount is paid back to the restaurant partners who are then expected to pay this amount to the government.
This new amendment if implemented will ensure that the companies do not pay this to the restaurants but directly to the government.
Currently the restaurant listed on the food aggregators pay 5% GST on food bill, while the aggregator itself pays 18% GST on the commission it charges the restaurants for providing delivery and marketing services.
The catch is that different food items invite different slabs of tax rate. It will be interesting to see if the government washes all of that away to make room for a uniform 5% tax charged on the delivery of food by these aggregators.
"With food delivery app under GST, a high level of tax evasion will be curbed. He said that food delivery is a service and therefore ought to be brought under the purview of GST," CAIT Secretary General Praveen Khandelwal said.
The CAIT had been raising this demand for quite some time now.
The apps are currently registered as Tax Collectors at Source (TCS) under GST. As per reports, tax loss to exchequer due to alleged under-reporting by food delivery aggregators is Rs. 2,000 crore since the past two years.
Swiggy and Zomato did not immediately comment. However an industry executive requesting anonymity said that the companies now will just need to come up with a mechanism wherein instead of transferring the tax collected from the customers, they will have to pay it to the government.
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