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Home Business

Discount offers from Swiggy, Zomato to come under Income Tax Department scanner

by Balraj
December 30, 2021
in Business, India News, Startups
Reading Time: 2 mins read
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Swiggy and Zomato delivery boys

Image Source: VCCircle

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The Income Tax (IT) Department would consolidate its scrutiny of the discounts offered by food delivery services such as Swiggy and Zomato Ltd. as the new GST policy takes effect beginning January 2022, a report by The Economic Times suggests. Under the new policies, these food aggregators platforms are required to collect and deposit GST with the government on restaurant services provided thru them.

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Swiggy and Zomato delivery boys
Image Source: VCCircle

The Goods and Services Tax (GST) council decided at its 45th meeting that food aggregator apps will levy taxes at the final point of delivery and will be mandated to pay GST on restaurant services. It means that when the rule goes into effect next year, Swiggy, Zomato, among others would have to pay a 5 percent GST rate, the same as what restaurants pay. Services offered via central kitchens or cloud kitchens will also be considered restaurant services and will be subject to a 5 percent GST.

Shri Tarun Bajaj, Secretary at Department of Revenue said in a statement at the time, commenting on the development, “There is no new tax. Suppose you order food from the aggregator. Now, the restaurant is paying taxes, but we found some restaurants were not paying [taxes].”

However, unlike ordering food straight from a restaurant, food delivery aggregators add an extra layer of complexity when it comes to tax collection at the source. These aggregators have been deeply involved in a price war with one another, offering ever-increasing discounts in order to attract customers away from their competitors.

Similarly, restaurants, e-commerce operators (ECOs) frequently offer discounts when customers’ transaction is associated with a certain credit card, debit card, or digital wallet. Banks typically partner with e-commerce marketplaces in the form of a “barter” to advertise their own banking services in exchange for discounts. The question now is whether the GST would apply to the overall pre-discount price or only the discounted amount. The fact that these food aggregators have partnerships with banking institutions that let them offer these discounts complicates matters even further.

There are challenges in calculating the exact amount of GST that must be paid without the discount. Under the GST framework, there are existing issues concerning tipping delivery boys, surge fees, delivery charges, and packaging fees all of which are imposed on customers.

Consumers, on the other hand, will see no difference. The consumer will continue to pay a 5 percent tax on their food ordered via these apps, which will eventually be forwarded to the government via various channels.

Tags: Cloud kitchendiscountsfood aggregatorGSTIncome Tax DepartmentSwiggyTarun Bajajzomato
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Balraj writes about Startup, Business, Technology related news on Techstory... For Business Enquires related to TechStory; Get in touch on: info@techstory.in...

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