GST on Food Delivery Charges: Authorities Question Swiggy and Zomato
Last Updated: November 21, 2024
The Directorate General of GST Intelligence (DGGI) has issued notices to Swiggy and Zomato, demanding a total of ₹750 crore in Goods and Services Tax (GST). This includes ₹400 crore from Zomato and ₹350 crore from Swiggy for the period from July 2017 to March 2023. The dispute centers on how delivery charges are classified and taxed.
What Is GST on Food Delivery Charges?
GST on food delivery charges refers to the tax imposed on meals ordered through platforms like Swiggy and Zomato. Currently, authorities are examining delivery charges bundled with food under the concept of “mixed supply.” Consequently, this may result in a higher tax rate of 18%.
The Case Against Swiggy and Zomato
Authorities’ Argument
- Delivery charges should be considered part of the food supply.
- Bundled delivery services qualify as mixed supply under the CGST Act, which means they attract the highest applicable tax rate.
Financial Impact
In addition to the current demand for ₹750 crore:
- Authorities had already issued notices in 2023, demanding ₹500 crore each from Swiggy and Zomato, indicating unresolved taxability issues.
Understanding Mixed Supply Under GST
Definition
Under Section 2(74) of the CGST Act, 2017, mixed supply refers to two or more goods or services sold together for a single price, where none of them serves as the principal supply.
Tax Implications
- Composite supply: Taxed based on the principal supply’s rate.
- Mixed supply: Taxed at the highest applicable rate among the bundled items.
Food Delivery and GST: A Complex History
The Ambiguity
In 2022, platforms such as Swiggy and Zomato were mandated to pay 5% GST on restaurant services and cloud kitchens under Section 9(5) of the CGST Act. However, delivery charges were not explicitly mentioned, which has caused confusion ever since.
Key Takeaways from the 45th GST Council Meeting (2021)
- The rule aimed to ensure tax compliance by E-commerce Operators (ECOs).
- Yet, the absence of specific guidelines for delivery charges has fueled the ongoing disputes.
Industry Perspectives
Food Delivery Platforms’ Standpoint
Swiggy and Zomato argue that:
- Delivery fees pass directly to delivery partners, not the platforms.
- Many delivery partners earn below the GST threshold of ₹20 lakh per annum, so they are not required to register for GST.
- Any ambiguity arises from unclear guidelines, leading platforms to rely on professional advice for compliance.
IAMAI Representation
The Internet and Mobile Association of India (IAMAI) has urged for clearer guidelines, emphasizing that the unregistered status of delivery partners complicates tax compliance.
Conclusion: A Call for Clarity
The GST on food delivery charges has become a contentious issue involving tax authorities, food delivery platforms, and the government. While authorities push for strict compliance, platforms emphasize the need for clear interpretations of the law.
What’s Next?
The Central Board of Indirect Taxes and Customs (CBIC) must issue comprehensive guidelines to eliminate ambiguity and ensure seamless compliance for all stakeholders.
Stay tuned for updates as this issue continues to evolve!
