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If the Council approves the recommendations made by the GST Council nominated fitment committee, “the 18% GST rate that we pay on delivery charges while ordering food via e-commerce platforms is likely to be brought down to 5%,” according to sources.
“The proposal will be applicable from January 1, 2022, retrospectively, and for business purposes—specifically for e-commerce operators—this reduced rate will, however, not allow them to take the benefit of input tax credit (ITC) when they file their GST returns,” sources added.
The proposal has been thoroughly examined by the GST Council’s fitment committee and aligns with the long-standing demand from e-commerce platforms in the food delivery sector to treat their services on par with restaurant services, sources noted.
GST notices to Zomato
However, does this mean that the recent GST notices sent to operators like Zomato—where CGST authorities in Thane, Maharashtra, claimed ₹803 crore—will now be resolved?
Sources clarified that the notice sent to Zomato pertains to the non-payment of GST on delivery charges for the period between “October 29, 2019, and March 31, 2022.”
Thus, even if this proposal is cleared, the only relief Zomato may receive would be for the last three months of that period, where GST would be paid at 5% without ITC instead of the current claim at 18%.
GST without ITC on delivery charges
Experts, who wished to be not named due to client sensitivities, pointed out that a GST rate of 5% without ITC on delivery charges might seem like a reduction for consumers. However, for e-commerce platforms, the scenario is different.
While paying 18% GST allows operators to claim significant ITC benefits, the 5% rate without ITC could, in some cases, lead to a higher overall tax burden.
“For some operators, the total tax outgo at 5% without ITC may even exceed what they pay at 18% with ITC,” an expert noted.
Now, all eyes are on whether the proposal will be cleared and, if so, what it will mean for consumers, e-commerce platforms, and the government.