Swiggy and Zomato Food Ordering Could Become More Expensive

Some stakeholders regard the GST update for food delivery as a positive step forward for competitiveness.
Some stakeholders regard the GST update for food delivery as a positive step forward for competitiveness.

Food delivery services like Swiggy and Zomato may become more expensive in the near future, since they will be forced to collect and pay tax on behalf of all eateries beginning January 1, 2022. The new action is in response to a finance ministry update that requires food aggregators to pay 5% GST on cooked food orders placed through their platforms. According to experts, the change would have an impact on both end users and small businesses. At the same time, platforms such as Swiggy and Zomato are projected to face increased compliance costs as a result of the new tax structure.

The GST Council advised compliance for food delivery platforms like as Swiggy and Zomato to pay GST on behalf of businesses they have on board at its 45th meeting in September. The finance ministry released a circular earlier this month announcing that the new regulation will take effect on January 1.

The circular stated, "As'restaurant service' has been notified under section 9(5) of the CGST Act, 2017, the e-commerce operator (ECO) shall be responsible to pay GST on restaurant services offered, with effect from the 1st January, 2022, through ECO."

Food aggregators would be responsible for collecting and paying GST from all eateries on their platforms as a result of the change. This implies that a platform must retain a distinct GST entry for each order it receives from a restaurant. Compliance with the rule will necessitate more resources from platforms.

The 5% GST obligation will be in addition to the existing 18% GST that platforms are required to pay for providing delivery services through their platforms. The tax will effectively be charged to the price of the food item delivered to clients through platforms."

While customers are likely to experience a rise in their e-commerce food bills as of January 1st, e-commerce food companies can expect a major increase in compliance load," said MS Mani, Partner, Deloitte India.

Swiggy One is a new Swiggy membership that includes unlimited deliveries for free.Small restaurant and food store proprietors would be required to pay 5% GST on all orders placed through online platforms as a result of the move. This is anticipated to have an impact on their revenue, prompting them to increase the prices they charge for orders placed through applications like Swiggy and Zomato."

The GST modifications are expected to have an impact on end-consumers because the cost of purchasing from smaller eateries that were previously outside the GST scope would increase if bought through food aggregators," said Rajat Bose, a partner at Shardul Amarchand Mangaldas & Co.

Small restaurant owners who generate yearly sales of less than Rs. 40,00,000 are not needed to pay GST in a normal scenario, according to tax experts.

Some stakeholders regard the GST update for food delivery as a positive step forward for competitiveness.Restroapp/wikipedia

Some stakeholders regard the GST update for food delivery as a positive step forward for competitiveness. Government officials also stated that the measure will assist to reduce tax evasion to some extent since the central revenue authority will be able to generate the taxes that restaurants would have avoided otherwise by making online platforms accountable for GST contributions.

"The government has just shifted the burden to Zomato and Swiggy, or any other online platform," said Kabir Suri, President of India's National Restaurant Association (NRAI). "The customer's cost stays unchanged,"' as reported by gadget 360.

Small-scale restaurant proprietors, on the other hand, perceive the upgrade as a barrier to entrance for newcomers.

People were afraid of coming out and dining in person because of the COVID-19 outbreak, which increased internet orders in the country. Due to the tremendous demand, several tiny eateries have opened. The government's action, on the other hand, might backfire.

"As the limitations loosen, people have begun going to major food outlets, we are already having difficulty creating our living," said Gautam Kumar, a street sandwich shop owner in New Delhi.

"It's tough for folks like us to make money after handing platforms commissions. "How we would be able to handle the additional 5% cut in such a scenario appears to be a mystery," he remarked as reported by gadgets 360.

Zomato and Swiggy both declined to comment on the storey.

In addition to food delivery aggregators, the finance ministry will impose a 5% GST on ride-sharing platforms that transport passengers in any sort of motor vehicle beginning January 1. (IANS/PR)

(keywords: GST, India, Zomato, Swiggy, Uber)

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