Your online food deliveries in India may cost less soon
What's the story
The Goods and Services Tax (GST) Council will discuss a possible cut in GST on food delivery charges at its 55th meeting on December 21. The existing 18% rate could be slashed to a mere 5% if the Council approves the Fitment Committee's recommendations. The change would apply retrospectively from January 1, 2022. However, e-commerce operators won't get input tax credit (ITC) under the reduced rate.
Industry impact
Proposal aligns with demands for parity in services
The proposal to reduce GST on food delivery charges is in line with the industry's demand to treat e-commerce food delivery services at par with restaurant services. Recently, Zomato was issued a GST notice by Central Goods and Services Tax (CGST) authorities in Maharashtra, claiming ₹803 crore for non-payment of GST on delivery charges from October 29, 2019, to March 31, 2022. If the GST proposal is cleared, Zomato may receive tax relief for last three months of that period.
Expert opinion
Tax reduction may increase burden on e-commerce platforms
Experts have observed that although a 5% GST rate without ITC may appear advantageous for consumers, it could further add to the tax burden of e-commerce platforms. "For some operators, the total tax outgo at 5% without ITC may even exceed what they pay at 18% with ITC," an expert said. The effect of this decision on customers, e-commerce platforms, and the government remains unclear until the proposal is formally approved or rejected by the GST Council.