Food Aggregator Recommendation 45th GST council meeting

Proposed GST Structure to be effective from 01.01.2022 to impact Restaurant Services

GST Council in their recent 45th GST Council Meeting held on 17th September,2021 has recommended on including Food Aggregators operating through Food Delivery Apps such as Zomato, Swiggy, cloud kitchens within the ambit of Restaurants services and make them liable to pay GST.

Current Situation

While ordering food online restaurants charge 5% GST on food bills to end Customers and the food aggregators charge 18% GST commission from restaurants for delivery and marketing.

Crux: –

Restaurants pay GST @18% on Commission charged by Food Aggregators (like Zomato and Swiggy) and

Restaurant collect GST@5% from Customers Through Food Aggregator and was paid to Government.

Amount transferred by food Aggregator to restaurants is (Gross Sales collection -Commission charged with GST-TCS collection)

Proposed Situation: –

It is now decided by the GST Council on its 45th GST Council Meeting that w.e.f 01st January, 2022 Food Aggregators shall be wholly responsible for collecting GST from Customers and depositing the same to the Government on its own account and companies such as Zomato, Swiggy and other such Food Aggregator Services that deliver food services are likely among these covered by this decision.

Crux: –

Food Aggregator shall itself collect GST@5% from Customers and will directly paid to Government.

Amount transferred by food Aggregator to restaurants is (Gross Sales collection -Commission charged with GST-TCS collection-GST Deducted for deposit to Government)

This move will certainly help Government to curb revenue as there were many unregistered Restaurants (below Rs.20 Lakhs) who were delivering Foods via Food Aggregators and yet were not liable to pay GST and hence it will lead supplies by Smaller Restaurants operating below Rs.20 Lakh threshold limit becoming taxable.

This shift of collection of GST would not affect End Customers as there is no new Tax.

However, it may impact the Compliances and Maintenance of Books of Accounts for Restaurants.

They will have to maintain two separate books of accounts for their normal business as well as for food delivered through Zomato or Swiggy.

They would be required to have proper book keeping with reconciliation.