food delivery companies Swiggy and have approached the government and sought clarification regarding the recent decision to treat them equally Restaurant under goods and services do (GST) structure.

Companies want clarity on how GST will be levied and whether this could lead to “tax cascading” or problems in claiming input tax credit.

The GST Council has said that
Food delivery platforms like Swiggy and Zomato will attract 5% GST, just like a restaurant.

The tax for platforms will be applicable from January next year. According to people aware of the developments, companies are concerned that the way the tax system works, their total costs may see a jump.

Emails sent to Zomato and Swiggy did not elicit any response. As of now, these companies pay GST only on the amount over and above the cost of the food. However, going forward, GST will be applicable on the total value of the order.

“In most cases, restaurants charge 5% GST on the food they provide on the platform, which is passed on to the customers. The question is what happens input tax credit, as restaurants are not allowed tax credit,” said a person aware of the development.

So, earlier if you used to order food for Rs 1,000 from Swiggy, the restaurant would charge 5% GST (Rs 50 in GST) on the cost.

Now Rs 1,050 will also attract 5% GST. While the government has claimed that it is unwilling to pass on the cost to customers, platforms want clarity on the exact method of tax, say people aware of the development.

Legal experts say that due to non-availability of input tax credit and other complications, Swiggy and Zomato may see tax cascading or double taxation.

Since GST will be applicable at two stages of the supply chain – once by restaurants, then by platforms – they will not be able to set it off under the input tax credit mechanism.

Abhishek A Rastogi, Partner, Khaitan & Co said, “The extension of tax due to the proposal should be final as the cost of indirect tax will be recovered from the end consumer and the GST Council has been extremely practical for the food and beverage sector.” .