GST Council Likely To Slash Tax On Online Food Deliveries To 5%

The Goods and Services Tax (GST) Council will reportedly consider lowering the tax levy on online food deliveries to 5% from 18% currently during its next meeting on December 21. 

Citing sources, CNBC-TV18 reported that the foodtech companies will not be eligible to avail input tax credit (ITC) on delivery charges. As per the report, the Council’s fitment committee plans to propose a reduction in GST rates with effect from January 1, 2022. 

With this, the government appears to have responded to calls from foodtech platforms to reportedly reduce GST on delivery charges and bring them at par with restaurants. 

A reduction in GST rates will provide relief and much needed clarity for Zomato and Swiggy, which have been reeling under the impact of multiple GST notices.

Notably, the proposed move also comes just days after Maharashtra GST authorities directed foodtech juggernaut Zomato to pay INR 804 Cr, including taxes and penalty, for non-payment of certain taxes between 2019 and 2022.

Besides this, the company also received multiple GST demand notices from authorities in Karnataka, Haryana, and Gujarat earlier this year. Its arch rival Swiggy is also facing potential GST liabilities to the tune of INR 326.7 Cr, as per its updated draft red herring prospectus (DRHP) filed with SEBI before going public. 

The developments comes a month after Zomato raised INR 8,500 Cr (around $1 Bn) through its first qualified institutional placement (QIP) in November. 

Shares of Zomato ended Monday’s session 2.03% higher at INR 294.25 on the BSE, while Swiggy ended 11.7% higher at INR 594.80. 

Meanwhile, the GST Council’s upcoming meeting in Rajasthan’s Jaisalmer will also likely see the Council debate a proposal to increase taxes on old and used electric vehicles to 18% from the present 12%. This is directly in contrast with the 5% GST rate on new EVs.