Food delivery services started collecting GST

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Food delivered by Swiggy, Zomato, or other food aggregators is likely to put a strain on your wallet.

Food aggregators such as Swiggy and Zomato will be required to collect and deposit a 5% tax. A step that will expand the tax base by including food businesses. This implies that consumers will be charged 5% instead of restaurants by companies like Swiggy, Zomato, Uber Eats, and others.

The first, and most important, changes to the Goods and Services Tax (GST) that go into effect from January 1 onwards.

Many eateries are not registered since their annual turnover is less than Rs 40 lakh Dhabbas, hawkers, tiny kiosks, stalls, and the like, for example, would be taxed on food deliveries made by them, which were previously exempt.

Many restaurants participate in a composition plan in which they do not charge the consumer 5% GST and do not claim Input Tax Credit (ITC), instead of paying a lump-sum GST. If the meal was provided by such restaurants, the consumer was not charged any GST. Consumers will now be charged 5% for meals ordered from these outlets.

Similarly, if food is supplied from unregistered restaurants that are illegally avoiding the GST system by using an e-commerce meal delivery service, such food supplies will be taxed at a rate of 5%.

The good news is that restaurants that were GST-registered and were delivering will have a break from compliance because they will no longer have to charge GST or file a return for this tax. However, because the compliance burden is shifted to food aggregators, the higher compliance costs may be passed on to consumers.

For the taxpayer, there are two aspects to consider. To begin with, there could be some tax leakages at restaurants, as they could cheat taxes by presenting their home delivery as delivery via an e-commerce food operator, saving the restaurants 5%.

Second, the government estimates that the tax loss to the national treasury due to alleged underreporting by food delivery aggregators, which has been estimated at roughly Rs 2,000 crore over the last two years, will be addressed. As a result, this will be advantageous.

Also, cab providers like Uber and Ola will have to collect 5 per cent Goods and Services Tax (GST) for hiring  2 and 3 wheeler vehicles from January 1 onwards.

In addition, beginning on New Year’s Day, all footwear, regardless of price, will be subject to a 12% tax. These are just a few of the many changes to the GST system that took effect in the new year of 2022.

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