Food aggregators such as Zomato and Swiggy are required to collect as well as pay an additional 5 percent GST (Goods and Services Tax) from today as new rules come into effect from January 1, 2022. The decision to levy an additional tax was taken during the 45th GST council meeting in September 2021.
The GST council justified the new 5% tax on online food aggregators, arguing that such a move will reduce instances of tax invasion by restaurants. The council meeting notification read that “services by cloud kitchens/central kitchens are covered under ‘restaurant service… under section 9(5) of the CGST Act, 2017’,” will attract this tax rate increase minus the input tax credit.
The finance ministry has clarified that customers will not have to pay this tax, only the food aggregators will have to pay it. However, media reports have quoted experts as saying that this move will impact both the customers as well as restaurants as such platforms will indirectly transfer the cost on both ends. They believe that restaurants will increase the prices of food articles to compensate this tax increase which is bound to impact their income. This will also increase tax compliances for both restaurants and online platforms which will put pressure on their resources.
Many small-scale restaurants are of the opinion that even though such a move will promote healthy competition among existing players, it will impede the rise of relatively new players in this business. Such a decision will impact small players, especially those earning ₹20 Lakh per annum, National Restaurant Association of India (NRAI) was quoted sating by Hindustan Times.
