Recent changes in Goods and Services Tax (GST) rules in India have mandated that online food delivery platforms such as Swiggy and Zomato pay a 5% GST on the restaurant services they provide. While this decision aims to crack down on tax evasion by restaurants, questions have arisen regarding the legality of charging customers extra money in the name of GST. Let’s explore this topic further.
The New Rules:
Effective January 1, 2022, the new GST rules require food delivery platforms to pay 5% GST on the restaurant services they facilitate. Previously, restaurants collected and deposited this tax themselves. However, in an effort to curb tax evasion, the responsibility has shifted to the delivery platforms. The intention is to ensure that taxes are paid to the government by restaurants listed on these platforms.
No Additional Tax Burden for Customers:
It’s important to note that customers who avail themselves of services through these platforms will not be subject to any new tax. The 5% GST charged by the platforms is not an additional burden on the customers. Instead, it is a tax collected by the platforms and deposited to the government through a different route. Union Finance Minister Nirmala Sitharaman has confirmed that customers will not bear any new taxes due to these changes.
Impact on Small Eateries and Compliance Burden:
The National Restaurant Association of India (NRAI) has voiced concerns about the impact on smaller restaurants earning less than ₹20 lakh per annum. These establishments were previously exempt from filing GST, but they will now need to do so as they come under the government’s tax net. This could increase the compliance burden on small eateries. However, it is worth noting that while they must collect GST for dine-ins, takeaways, and deliveries, they are not required to collect taxes for orders placed through delivery platforms.
The recent changes to GST rules in India have made online food delivery platforms responsible for paying a 5% GST on restaurant services they facilitate. While concerns have been raised about the legality of charging extra money in the name of GST, it is important to understand that customers are not being subjected to any additional tax. The GST collected by the platforms is merely a means to ensure proper tax compliance from restaurants listed on these platforms. However, the impact on smaller eateries and the increased compliance burden remain points of consideration for the industry moving forward.
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