No new tax but Swiggy, Zomato to now collect, pay GST instead of restaurants: Sitharaman

Finance Minister Nirmala Sitharaman, speaking on the outcome of the 45th GST Council meeting in Lucknow today, said there is no new tax on online food-delivery operators like Zomato and Swiggy, but they will have to pay 5 per cent GST on restaurant service offered via them.

These taxes, Sitharaman said, will be charged at the time of delivery. This means that 5 per cent GST that was earlier paid by restaurants on food order will now be paid by food delivery companies like Zomato and Swiggy. The minister clarified that it's not a new tax and that end-users will not have to pay extra money. The minor tweak is aimed at avoiding tax evasion, which in the case of restaurants was prevalent.

Also read: Council thinks it's not right time to bring petrol, diesel under GST: Sitharaman

"Regarding Swiggy-like operators and gig offices, it has been decided that since the place where food is delivered will be the point where tax is collected, the Swiggy-like operator who will be collecting tax will pay up the GST on it," Sitharaman said.

Services by cloud kitchens or central kitchens are covered under "restaurant service", and attract 5 per cent, without ITC, the minister said. She also clarified that alcoholic liquor for human consumption is not "food and food products for the entry prescribing 5% GST rate on job work services concerning food and food products".

Also read: FM Sitharaman announces GST exemption on expensive drugs like Zolgensma, Viltepso

MS Mani, Senior Director, Deloitte India, said: "While food delivery services would constitute e-commerce services, sufficient safeguards need to be taken in subjecting them to GST to ensure that smaller food outlets are protected and consumers do not end up paying more."

Meanwhile, the Council extended concessional tax rates on certain COVID-19 drugs by three months till December 31. The Council, which comprises the Union finance minister and her state counterparts, decided to continue keeping petrol and diesel out of the GST purview as subsuming the current excise duty and VAT into one national rate would impact revenues.

Finance Minister Nirmala Sitharaman also said GST has been exempted on muscular atrophy drugs like Zolgensma and Viltepso, which cost crores of rupees.  It also extended the period of concessional GST rates on certain COVID-related drugs by three months till December 31 but decided not to give the same benefit to medical equipment. GST Council also recommended new footwear and textile rates from January 1.

Also read: IGST on import of aircraft, other goods on lease exempted from double taxation