The fitment committee comprising officials from state and central government GST departments has examined this issue including whether to continue taxing food delivery companies such as Swiggy and Zomato on the delivery charges.
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GST Officials Review Taxation of Delivery Charges by Swiggy and Zomato Amid DGGI Notices and Industry Concerns
This review comes after the Directorate General of GST Intelligence (DGGI) issued notices last year, seeking clarification on how delivery charges should be classified. The DGGI contended that delivery charges should be included in the food supply when these costs are paid along with food and that they would attract an 18% GST rate.
The Directorate General of GST Intelligence (DGGI) issued show-cause notices to Zomato and Swiggy in June for the demand of Goods and Services Tax (GST) from July 2017 till March 2023, as part of its nationwide probe into food delivery companies. Zomato was demanded to provide ₹400 crore while the demand from Swiggy was to pay ₹350 crore.
The Central Goods and Services Tax (CGST) Act, 2017, Section 7(1)(a) defines the supply of goods and services to include various forms of transactions, potentially including food delivery charges as part of the service. But the law is unclear on how exactly these services should be categorized which has caused a headache for the industry and concerns that this reading could lead to an inappropriate tax burden.
Though advisory in nature and cannot quash DGGI’s notice, the fitment committee has to review such issues and will recommend policy changes. According to tax officials, Section 9 of the CGST Act outlines the levy of GST on the supply of goods and services, and while delivery charges are typically seen as incidental to food delivery, the application of tax to these charges needs further clarification.
The Committee may propose changes to clarify the classification, which would then be reviewed by the GST Council. It is unclear whether the 55th GST Council meeting scheduled for December 21 in Jaisalmer, Rajasthan, will address this issue.
FAQs
Why is GST reviewing delivery charges?
It’s reviewing if delivery charges bundled with food should be taxed at 18%.
What impact could this have on food delivery?
It may lead to higher GST rates, increasing costs for Swiggy and Zomato.
