New GST Rules To Complicate Tax on Tips, Surge Fees Or Extra Delivery Charges For Swiggy And Zomato

New GST Rules To Complicate Tax on Tips

.Food delivery platforms Zomato and Swiggy could face GST related complications on tips given to delivery boys, surge fee, delivery fee and packaging charges charged to customers. Going further the additional monies levied on customers could also face GST for the platforms.

At present, restaurants pay GST at 5%. If Zomato, Swiggy pay GST at 5% then they will have to bear a higher cost. Last month, the GST council has said that food delivery platforms such as Swiggy and Zomato should cough up 5% GST just like restaurants. This will come into effect from January next year.

This would mean that Swiggy and Zomato will have to slap a 5% tax on the total cost of food. However, it is still unknown if this GST would also be applicable on the additional charges taken by these platforms such as surge fee, delivery fee and packaging charges. The company is looking to charge 18% GST instead of 5% GST on this cost, so that company can avail the input tax credit. At present, restaurants do not get any input tax credit on the amount.

Input tax credit (ITC) is basically GST paid on input services or raw materials that can be set off against a certain kind of future tax liability. This means that the GST paid becomes pure cost. This would also be the case for Swiggy and Zomato if they pay 5% GST.

The food delivery platforms have huge costs in terms of technology and rents and they would want input tax credit. The thinking is that the tax department too would not take objection when they are paying 18% GST instead of 5%.


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