GST Council May Reduce Tax on Food Delivery to 5%: What It Means for Consumers and Companies:

GST Council May Reduce Tax on Food Delivery to 5%: What It Means for Consumers and Companies The Goods and Services Tax (GST) council is likely to consider the reduction of tax on food delivery services. According to sources, food delivery apps like Zomato and Swiggy may benefit from this new tax cut, with GST rates likely to come down from the current 18 percent to 5 percent. The decision is likely to come up for discussion in the next GST Council meeting planned on Saturday, December 21, 2024 at Jaisalmer, Rajasthan. If approved, the new tax rate will be applied retroactively, starting from January 1, 2022. What the Tax Cut Means for Food Delivery Companies The proposed reduction in GST would be a welcome change for food delivery services, which have long lobbied for a tax rate comparable to restaurants. However, there is a trade-off involved. While the tax cut would make the service more affordable, food delivery companies would lose the ability to claim input tax credits (ITC) when filing their GST returns. This could result in higher tax liabilities for these companies. Also relatedly, the food discovery and ordering company was hit with a tax notice just recently amounting to an whopping Rs. 804 cr for the 2019-2022 period which involved taxes and penalties. That proposed reduction in tax rates shall have impact only on last three months of the said period, though that won't help in reducing much as far as the dues against this are concerned. Pros For Consumers: Although the tax cut may benefit food delivery companies, this is uncertain to the consumer. The fact that the food delivery companies may no longer be in a position to claim ITC may, in turn lead to a resultant increase in the cost incurred by consumers in some places. The industry has been asking for the GST rate to be aligned with restaurants, and if approved, the tax cut would meet this demand. However, it remains to be seen whether consumers will feel the impact of the reduction in taxes or if it will only benefit the companies. All eyes are now on the 21st December GST Council as it could give a crystal-clear view of the situation regarding the potential tax change with its consequences for companies as well as consumers.