Discount coupons offered by food delivery aggregators including Zomato and Swiggy are about to come under the tax authorities scanner from next year, according to media reports.
Sources close to the matter who spoke to the media said, authorities will be specifically investigating discounts offered by these apps to customers who use a particular payment method like a certain bank’s credit card or a certain company’s digital wallet.
During its 45th meeting, the Goods and Services Tax (GST) council decided that food aggregator apps will collect tax at the final point of delivery and will have to pay GST on restaurant services. It translates that Zomato, Swiggy and others will have to pay a 5% GST rate, at par with what is collected from restaurants, once the ruling comes into effect starting next year.
“There is no new tax,” revenue secretary Tarun Bajaj said in a statement while speaking on the development at the time. “Suppose you order food from the aggregator. Now, the restaurant is paying taxes, but we found some restaurants were not paying [taxes].”
But unlike ordering food directly from a restaurant, food delivery aggregators add an additional layer of complications when it comes to the collection of tax at the source. These aggregators have been locked in a price war with each other, offering bigger and bigger discounts in a bid to attract customers from their competitors.
The question is, should tax be charged on the original price of the order before the delivery or on its price after the discount. This is further complicated by the fact that these aggregators have partnerships with banks that help them offer these discounts. An ET report that brought up the matter insinuated that this could be considered a ‘barter’ for the promotion of banking services.
Inc42 reached out to both Swiggy and Zomato representatives but haven’t yet received a statement from either of them.