GST Council Likely To Discuss 5% GST On Zomato, Swiggy, Other Food Delivery Services

The GST Council is expected to address taxability issues related to food delivery services in its upcoming meeting on Dec. 21. The discussion will focus on platforms such as Swiggy and Zomato and the proposed Goods and Services Tax on delivery services provided by their partners.

The Council may clarify whether delivery services should attract a 5% GST without input tax credit, aligning with the rules for "restaurant services" that have been in effect since Jan. 1 2022. Currently, food delivery platforms do not pay GST on delivery services, citing that their delivery partners, who are mostly unregistered, directly deliver orders to customers.

Delivery partners are generally assumed to fall below the GST registration threshold of Rs 20 lakh in annual turnover, which exempts them from registration requirements. However, the end customer does not have the option to select a delivery partner, and no invoice is issued by the delivery partner to the customer. The entire transaction, including invoicing, payment, and refunds, is managed by the food delivery platforms.

To address this, it has been recommended that these platforms be classified as aggregators for delivery services. This would make the platforms liable for GST on delivery charges.

The fitment panel, which includes revenue officials from the Centre and states, has recommended inserting an explanation under Section 9(5) of the GST Act. This explanation would clarify that restaurant services include delivery services.

“This would ensure that there is certainty in respect of the tax liability and also as to who is the person responsible to paying the tax to the Government,” Fitmet panel noted.

If the Council adopts this recommendation, food delivery aggregators like Swiggy and Zomato would need to pay GST at a 5% rate without input tax credit on delivery charges collected from customers. This liability would apply retrospectively from Jan. 1, 2022.