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I-T department to probe discounts offered by Zomato, Swiggy

The concern surrounding the probe is the coupon discounts offered by food delivery applications on using a particular payment platform

December 30, 2021 / 01:36 PM IST
Swiggy  | Valuation: $5.5 billion | City: Bengaluru | Industry: Supply chain, logistics, & delivery	| Select investors: Accel India, SAIF Partners, Norwest Venture Partners
(Representational Image: JasonArora/Shutterstock.com)

Swiggy | Valuation: $5.5 billion | City: Bengaluru | Industry: Supply chain, logistics, & delivery | Select investors: Accel India, SAIF Partners, Norwest Venture Partners (Representational Image: JasonArora/Shutterstock.com)

Come January, discounts offered by online food delivery platforms Zomato and Swiggy are set to face Income Tax department’s scrutiny under the GST regime, The Economic Times reported on December 29.

The concern surrounding the probe is the coupon discounts offered by food delivery applications on using a particular credit card, debit card or any digital wallets for making payments.

Besides, what might also be a point of the probe is the arrangement founded between restaurants and the applications, which form the base of these discounts. From 1st January, 2022, both Zomato and Swiggy are set to be treated at par with restaurants. Coming under this setup would potentially mean that applications like Swiggy and Zomato would have to pay a tax of around 5 percent on the total cost of food.

What is the issue? 

Unlike when you order food directly from the restaurant, food delivery applications, which function as e-commerce operators, offer discounts at various transaction points on the usage of a specific way of payment, like a debit/credit card, digital wallet or more.

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Additionally, if customers order beyond a particular amount or from a certain restaurant, they are given extra discounts.

One of the prime questions here is that on what price should the GST of 5 percent be levied on-the original price or the discounted one? Say, for instance, you order your favourite Pizza combo worth Rs 650. But when you pay through any application, you get a discount of Rs 100, which means you ended up paying only Rs 550.

So, at what price will the 5 percent GST be actually charged? On the original charge of Rs 650 or the discounted Rs 550?

There are impediments in determining the exact amount on which GST must be paid, sans the discount as well. Notably, complexities already exist around treatment for tipping delivery boys, surge fees, delivery fees and packaging charges charged to customers under the GST framework.

Since small eateries or dhabas do not pay GST, the burden of paying GST on customers' orders would fall on the delivery apps. Notably, restaurants are charged 5 percent GST but remain devoid of an input tax credit on the amount. Given that these delivery applications incur huge costs in terms of technology and rent, they would definitely want to avail such credit. For this, companies are looking to charge 18 percent instead of the usual 5 percent.
Moneycontrol News
first published: Dec 29, 2021 12:41 pm
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