Zomato, Swiggy may have to pay GST on surge & delivery fees, tips

 









Food delivery platforms Zomato and Swiggy could face Goods and Services Tax (GST) related complications on tips given to delivery boys, surge fee, delivery fee and packaging charges charged to customers. Going ahead the additional monies levied on customers could also face GST for the platforms, the Economic Times mentioned in a report citing tax experts.

At present, restaurants pay GST at 5%. If Zomato, Swiggy pay GST at 5% then they will have to bear a higher cost. Both the companies in the past one week have also reached out to their tax advisors to seek clarity around this, the financial daily mentioned.

last month, the GST council has said that food delivery platforms such as Swiggy and Zomato should cough up 5% GST just like restaurants. This will come into effect from January next year.

This would mean that Swiggy and Zomato will have to slap a 5% tax on the total cost of food. However, it is still unknown if this GST would also be applicable on the additional charges taken by these platforms such as surge fee, delivery fee and packaging charges.

“This point (GST on surge fee, delivery cost etc) was being discussed. The company is looking to charge 18% GST instead of 5% GST on this cost, so that we can avail the input tax credit,” a person with direct knowledge of the matter told ET.

At present, restaurants do not get any input tax credit on the amount.

Input tax credit is basically GST paid on input services or raw materials that can be set off against a certain kind of future tax liability.

This means that the GST paid becomes pure cost. This would also be the case for Swiggy and Zomato if they pay 5% GST.

“The food delivery platforms have huge costs in terms of technology and rents and they would want input tax credit. The thinking is that the tax department too would not take objection when they are paying 18% GST instead of 5%,” the person close to the development told ET.

Then there is a question of what happens to tips that customers willingly give to delivery boys.

As far as tips are concerned, both the delivery start-ups will have to demonstrate to the tax department that they are just a “pass through” between the delivery boys and the customer and each and every penny is being handed over to the delivery boys.

“The tips paid by the customers to the delivery boys do not represent any service with respect to the delivery of food and must not be subject to tax as there is an absence of any activity,” the publication quoted as saying Abhishek A Rastogi, partner at Khaitan & Co.

Comments

Post a Comment

Popular posts from this blog

Centre appeals against ruling on levy of GST on maintenance charges to resident welfare associations

Image
  The Centre has preferred a writ appeal before the Madras High Court against a single judge's order that flat or villa owners paying more than ₹7,500 a month towards maintenance charges to their residents’ welfare associations must pay Goods and Services Tax (GST) at the rate of 18% only for the amount exceeding ₹7,500 and not for the entire monthly contribution. Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup on Wednesday allowed an application filed by the Centre to dispense with production of a certified copy of the judgment passed by Justice Anita Sumanth recently and directed the Registry to list the appeal for admission in the usual course. Justice Sumanth had in July this year quashed an order passed by the Authority for Advance Ruling (AAR) on June 21, 2019 as well as a consequent circular issued by the Department of Revenue under the Union Finance Ministry on July 22, 2019 since both of them had insisted upon collecting GST for entire monthly contribution. The jud...
Read more

Seven key things to know before filing income tax return (ITR) for FY21

Image
  The last date to file income tax return for the financial year 2020-21 has been extended to September 30, 2021. Although there is more than two months left for the deadline to end, it is always recommended to complete the task as soon as possible and not to wait for the last minute. Worth mentioning here is that the income tax department last month launched a new e-filing portal (www.incometax.gov.in) to speed up the processing of tax returns. The I-T department will soon launch a mobile application, having all the features of the new portal. This year taxpayers have to take care of the following changes in the ITR filing process. 1) A new utility named JSON has been launched for filing tax return forms for FY21. At present, only three forms, ITR 1, 2 and 4 have been released. These new forms will import pre-fill data such as personal details, salary income, dividend income, interest income, capital gains and all the information available in Form 26AS. 2) Taxpayers will have the ...
Read more

Income Tax Dept detects ₹350 cr unaccounted cash receipts after raid in Rajkot

Image
  The Income Tax Department carried out a search and seizure operation on a real estate group based in Gujarat's Rajkot and found unaccounted cash receipts in various projects of approximately ₹350 crore, the Finance Ministry said on Friday. The group is among Gujarat’s prominent real estate builders and developers and is actively engaged in real estate, construction and land trading businesses in and around Rajkot. More than 40 premises were covered in the search operation. During the course of operation, many incriminating documents and digital evidences were seized indicating involvement of the group in unaccounted transactions. The IT sleuths found substantial evidence of transactions outside the regular books of accounts, unaccounted cash expenses, cash advances received and interest paid in cash. Evidence of on-money payments in real estate projects-flats, shops and land deals has also been found. Total unaccounted cash receipts in various projects of approximately ₹350 crore...
Read more