Govt taxing Swiggy, Zomato to not burn consumer's pocket: Experts

Tax experts are of the opinion that the government's move to tax online food aggregators like Swiggy and Zomato instead of restaurants would not impact the consumer. Come January 1, food delivery apps will collect and deposit 5% GST to the government (in place of restaurants) for deliveries made by them.

"There would be no extra tax burden on the end consumer and this will reduce the burden on restaurants. Certain unregistered food suppliers used to evade taxes but now that would be taken care of by the food aggregators", said M Siddharth, Partner & MD, Synmac Consultants Pvt Ltd.

He added that the government's coffers will get heavier as far as revenue is concerned.

Also read: States demand extension of GST compensation period

R Patnaik, Partner & Head - Taxation, Cyril Amarchand Mangaldas believes that the move will definitely increase the compliances for e-commerce players.

"In the food-domain, it can only be hoped that no double taxation on restaurant services is triggered and only supplies made by an unregistered restaurant service provider through the e-commerce players are brought within the ambit of GST," he added.

Revenue Secretary Tarun Bajaj echoed the FM's announcement clarifying that there would be no new or extra taxes added. He had stated that now instead of restaurants, the tax will be payable by aggregators which would prevent revenue leakage.

"Since small restaurants do not report their accounts properly, the tune of revenue loss is not exactly known now. This move is aimed at plugging that loss", explains Siddharth.

As of now, restaurants extending services on the food aggregators platform pay 5% GST on the food bill, whereas the aggregator pays 18% tax on the commission charged for its services.

Read | GST council changes rates for goods; check here

What will be interesting to see next is if a uniform slab (say 5%) would be made applicable to the food aggregators or not.

While some feel that this move will not affect the government's tax collections, others feel it will. B Gaonkar, Tax Consultant at Shoolin Consultancy is of the view that the dominance of food aggregators and ignorance on the part of restaurateurs led to a huge revenue forfeit of hotel/restaurant owners by the GST department, ultimately knocking down the government's treasury, too.

Confederation of All India Trader (CAIT) welcomed the move calling it a landmark decision that will bring parity between online & offline food delivery. Further saying that it would boost the country's ailing restaurant business.

Also read: Zomato, Swiggy brought under GST ambit: What it means for customers

"It’s a much-awaited pragmatic step of the GST Council", said Praveen Khandelwal, Secretary-General, CAIT.

Law firm Lakshmikumaran & Sridharan's founder & Managing Partner, V Lakshmikumaran said, "Government's move is commendable as all doubts have now been laid to rest by the council; the industry can now move forward."

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