5% GST on Food Delivery Charges: Retrospective Impact on Apps
The GST Council is considering imposing a 5% GST on food delivery charges by apps like Zomato and Swiggy, effective retrospectively from 2022. This proposal, if approved, could significantly impact food delivery platforms due to liabilities on past transactions.
🌍 Why the 5% GST Proposal?
The fitment committee, comprising top officials, supports the 5% GST levy on food delivery apps. The rationale behind this decision stems from:
- Tax Demand of ₹750 Crore: GST authorities identified discrepancies and demanded an 18% GST on delivery charges. To balance this, a 5% rate is proposed.
- Consumer Impact: The delivery charge is a small fraction of the total order, so the 5% GST will likely have minimal impact on consumers.
- Compliance Clarity: This move aims to streamline tax collection and eliminate ambiguities.
🛠️ Retrospective GST: Challenges for Food Apps
A retrospective imposition from 2022 poses practical challenges for food delivery platforms:
- Tax Collection Hurdle: Apps may struggle to collect taxes on past transactions.
- Financial Liability: This could create a significant tax burden for platforms.
- Legal Backing: Case laws supporting retrospective tax demands include M/s. N.C. Varghese v. Income Tax Officer (Kerala HC), which upheld retrospective tax laws under specific conditions.
🏦 Impact on Real Estate Sector
The GST Council also aims to clarify GST on charges paid for Floor Space Index (FSI) to local authorities. Builders may need to pay 18% GST on FSI-related charges, which are viewed as commercial services benefiting their business.
Key Points:
- FSI Charges: Attract 18% GST.
- No Exemptions: Due to the availability of Input Tax Credit (ITC).
- Case Law Reference: In Doypack Systems Pvt. Ltd. v. UOI, the Supreme Court reinforced the principle of consideration for services rendered.
🏷️ What’s Next for GST on Delivery Charges?
The GST Council, led by Finance Minister Nirmala Sitharaman, will meet to finalize these proposals. If approved:
- Food Apps: May face liabilities for uncollected GST on past orders.
- Consumers: May experience slight price adjustments.
- Real Estate: Builders will need to factor in 18% GST on FSI charges.
🔍 Stay Updated
As these GST proposals are clarified, food delivery apps and builders must adapt their compliance strategies to avoid penalties and legal challenges.