Swiggy, Zomato, and cloud kitchens may soon be classified as restaurant services under GST

Food delivery apps like as Swiggy and Zomato may soon be classified as restaurant services, requiring them to pay the Goods and Services Tax (GST).

On Friday, the GST Council will discuss this issue. They urge e-commerce operators that provide restaurant services on their applications or websites be notified as “e-commerce aggregators” in the same group as restaurant services. This would make them suppliers and hence subject to GST obligations.

When restaurants deliver food and non-alcoholic fluids, they are subject to a 5% GST (without input tax credit). As tax collectors at the source, food aggregators are registered. Food delivery apps will be taxed at the same rate as restaurants if this idea is approved.

Tax fraud increased in India as food deliveries, notably from unregistered firms, according to the report. Many restaurants don’t pay GST, and other small eateries aren’t even registered to do business at all. For this reason, the panel advised that restaurants pay on behalf of the eateries.

GST losses were anticipated at Rs 2,000 crores for FY20 and FY21, even though food deliveries soared during the pandemic.

An official told Business Standard that Swiggy and Zomato do not conduct compulsory registration checks, and that unregistered businesses are supplying through these food delivery portals.

The group has proposed that cloud kitchens be included in restaurant services with a 5% fee without input tax credit. In a cloud kitchen, there is no dine-in room or takeaway counter, and the food is exclusively available for delivery.

To that end, the panel recommends issuing an official statement clarifying that cloud kitchens and central kitchens are considered restaurants and are subjected to a 5 percent GST without ITC.