No Input Tax Credit under new GST regime for Food delivery apps from 1 January

Under the new GST mechanism, which goes into effect on January 1, e-commerce operators (ECOs) in the food delivery space, such as Swiggy and Zomato, will not be eligible for input tax credit (ITC). This will be included in the frequently asked questions (FAQs) that will be made available soon.

“We received advice on ITC eligibility and other issues.” “There is no possibility of ITC for food delivery platforms because restaurants paying GST at the rate of 5% are not eligible for ITC and only the onus to deposit the GST has changed,” a senior Government official told BusinessLine.

In its meeting on September 17, the GST Council recommended that ECOs in food delivery be responsible for paying taxes. At the moment, it is the restaurants that pay the taxes. The government has already stated that this is not a new tax and that there will be no consequences for customers. The tax rate will remain at 5%, and the Finance Ministry has already notified the public of the change. This will not apply to restaurant services provided by luxury hotels that declare a tariff of at least $7,500 per day for any unit of accommodation.

The GST Council recommended a change based on the findings of an e-commerce sectoral study of food delivery suppliers/ECOs. These apps are currently registered as tax collectors at the source under the current system (TCS). According to officials, one of the reasons for such a change is the committee’s observation that these food-tech companies do not have to perform a mandatory GST registration check, and there are unregistered restaurants supplying through them.