Food delivery apps such as Zomato and Swiggy will collect 5% GST, or Goods and Services Tax, from customers rather than the restaurants from which they pick up orders, Finance Minister Nirmala Sitharaman announced Friday evening following a meeting of the GST Council in Lucknow.
These apps are currently registered in GST records as TCS, or Tax Collected at Source.
In a press conference following the GST meeting, Revenue Secretary Tarun Bajaj clarified that no new taxes were announced and that the GST collection point was simply moved.
“Assume you order food through the aggregator… the restaurant is now paying taxes. However, we discovered that some restaurants were not paying. We are now stating that if you place an order, the aggregator will collect from the consumer and pay the authorities rather than the restaurant “He stated.
“There will be no new taxes…” Mr. Bajaj went on to say.
He explained that an examination of some returns suggested that some restaurants were evading taxes.
The gap in taxable turnover for suppliers where TCS was deducted by a delivery app was greater than the turnover declared by such suppliers, according to an analysis of returns filed by delivery apps and some Haryana restaurant services.
The amount of evasion is thought to be substantial due to the high supply volumes of food delivery apps.
Among the major decisions announced tonight by the powerful GST Council was that petrol and diesel would not be subject to GST at this time.
Ms Sitharaman stated that the Council deliberated on this in light of a recent Kerala High Court order and concluded that “it was not the right time to bring petroleum products under the GST.”
The minister also stated that the GST on biodiesel, which is used by oil marketing companies to blend with diesel, has been reduced from 12% to 5%.
The Council also extended the concessionary GST rates on drugs used in COVID-19 treatment until December 31, and exempted certain other medicines, including those used to treat muscular atrophy, from the tax (and single doses of which cost crores of rupees).
GST on cancer treatment drugs was also reduced; for example, Keytruda (the brand name for Pembrolizumab) will now be subject to 5% GST, down from 12% previously.