GST 2.0: The customers’ inclination to order their favourite pizzas from Domino’s or other operators might shift to their platform instead of food delivery platforms like Zomato and Swiggy once the new
indirect tax rates under GST 2.0 come into effect from September 22.
The reason links to the rejig in GST 2.0, leading to a potential tax arbitrage for customers to opt for restaurants like Domino’s or other eateries that have their own delivery network, according to a report of the Indian Express. Domino’s is levying 5 per cent GST on its food orders, the rate for restaurant, along with packaging charges.
Basically, customers will be choose to order directly from these chains having their delivery partners, instead of opting for Zomato and Swiggy.
An industry expert told the Indian Express that tax structure for Domino’s and other similar restaurants haven’t changed post the GST 2.0, but Zomato and Swiggy weren’t clear whether GST is applicable on delivery separately or not. However, delivery is applicable.
Earlier, local delivery services like food, groceries or parcels locally were not covered under Section 9 (5) of the CGST Act, causing confusion on GST implications.
Under Section 9(5), the Electronic Commerce Operator (ECO) — for example, Swiggy, Zomato, Blinkit, Amazon, etc. — will be made liable to pay GST on behalf of the delivery person, but only in cases where the delivery partner is not registered under GST. It means online delivery platforms will have to pay 18 per cent GST on services.
The GST Council, led by the Finance Minister Nirmala Sitharaman, has done a major overhaul by bringing local e-commerce delivery services under section 9(5) of the CGST Act. It means online delivery services at the local level will attract 18 per cent GST effective from September 22, along with the 5 per cent levy for restaurant services.
Food delivery services offered through electronic commerce operators (ECOs) are divided into two components: the restaurant service and the delivery service. At present, restaurant services routed via ECOs attract 5 per cent GST without input tax credit. On the recommendation of the 45th GST Council meeting in September 2021, these services were brought under Section 9(5) of the CGST Act, 2017, with effect from January 1, 2022. However, the levy of GST on the delivery component linked to restaurant services through ECOs has not been explicitly notified.
