Restaurant industry wants GST clarification on Swiggy and Zomato

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The restaurant industry is concerned about how the decision to collect GST and Swiggy would be implemented and plans to contact the government about it.

They are seeking clarification for the price-sensitive small restaurants currently exempt from GST that have been shipped to both platforms after Covid and wonder if the tax on Zomato and Swiggy would be passed on to them. Other operational guidelines must also be issued for implementation, they said.

“We would send out suggestions which should be considered as there are many operational issues that will arise and there has to be proper guidance. How and when would this be implemented? There is also the issue of the existing thresholds for the implications of the GST on restaurants under different slabs and their impact on them, ”said Pradeep Shetty, Honorary Co-Secretary of the Federation of Hotel and Restaurant Associations of India (FHRAI).

The industry wants to know if small restaurants that do not pay GST will have to renegotiate contracts with the two platforms following the move, “said a restaurateur familiar with the matter.

“We are only concerned about the implications for small restaurants in which GST registration is not required, or they are classified under the composition regime, with the aim of reducing the burden on small. businesses, ”said Shivanand Shetty, president of Indian Hotels & Restaurant Association (AHAR).

A person familiar with business at Zomato said the company is in contact with authorities to determine implementation. “Conversations with the government are underway on how this would work,” the person said. Zomato and Swiggy did not respond to emails seeking comment until press time.

Tax experts said that given how the GST framework works, some of the small restaurants may see their costs increase in the future.

“The last thing that needs to happen is the increased costs when delivery takes place from those suppliers who are currently exempt under the tax system. One way to extend the exemption is to specifically exempt where delivery by the online operator is made with respect to goods from small suppliers, ”said Abhishek A Rastogi, partner at Khaitan & Co.

Under current regulations, restaurants pay 5% GST, but they do not get input tax credit. The input tax credit is basically the GST paid on raw materials or purchases that can be deducted from future tax liability of some type.

Tax experts say some of the small restaurants and cloud kitchens do not currently pay the GST.

The new GST regulations, however, could mean they will have to cough up the tax.

In some cases, these small restaurants are worried about having to raise prices, which can also impact their demand.

In some cases, Swiggy and Zomato may also need to renegotiate the contracts they have with these restaurants to include the new GST regulations.

Swiggy and Zomato have also reached out to the government and asked for clarification on the recent decision to treat them on an equal footing with restaurants under the GST.

Businesses want clarification on how the GST would be collected and whether that could lead to “cascading taxation” or problems claiming input tax credits, ET had reported earlier.

The GST council said food delivery platforms such as Swiggy and Zomato should spit out 5% GST, as should restaurants. The tax for platforms will go into effect from January next year.

According to those familiar with the developments, businesses are concerned about the functioning of the tax system; they might see a jump in their total costs.


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