GST effective from July 1, 2017 is paid by the service provider, who recovers it from the party receiving the service. Customers order food on an online platform that connects them to restaurants and pays for food, delivery and packaging.
The government has no doubt about the GST of food, and the ongoing dispute involves the recovery of delivery fees. The current subpoena is related to the GST-related packaging fees, and despite being collected from customers, the tax agency doubts (and when) whether it has reached the national safe. Tax Doctors share their views with ET.
Ashish Karundia, founder of CA Ashish Karundia & Co, said: “Under GST law, when two or more goods or services are provided together in a normal business process, it will be considered a consolidated supply. The law gives an example: if goods are packaged and shipped, everything involved, including the supply of goods, packaging and shipping (including one package), is considered a package rate (and tax rate), and a summary of taxes (similar to), as well as taxes (similar to), as well as taxes (similar to), as well as taxes (for example). From this perspective, the GST of packaging fees may be the responsibility of an e-commerce platform (such as a food delivery application), similar to restaurant services, because packaging and food supply are accidental.”
However, there is also the view that if the packaging fee is listed separately in the bill, then such packaging fee is for independent supply and should be taxed in the hands of the restaurant. The subpoena has been served in the past few months.
Dinesh Agrawal, who co-hosts the indirect tax business at law firm Khaitan & Co, said that food supply in restaurants or cloud kitchens is taxed in the hands of such apps through food delivery apps such as Zomato or Swiggy. “Now, it seems that there is a dispute over the payment of taxes on packaging fees, and if so, who is responsible for paying the tax. The department believes that packaging is part of the integrated supply, where food is the main supply.
However, the app considers packaging to be a unique supply, and restaurants alone can pay taxes. The department has begun an investigation into possible short-term taxes and has determined that the habit is followed by different restaurants, which have issued subpoenas. ”
For example, if the food cost is Rs 1,000, then on the order, delivery and packaging charges are Rs 100 per person, the customer will total Rs 1,260 (including Rs 60 for GST, which is Rs 60, calculated as 5% of Rs 1,200). The food application deducts Rs 50 (GST) and its commission (or fees) from the balance in Rs 1,210 to pay the remaining amount. The question is: Is the platform responsible for paying for packaging (such as payments on food)? Did the restaurant pay GST and, if so, would it apply to the interest rate of 5% of the packaging fee (app for the restaurant service)? Under Article 9 (5) of the Central GST Act Platform, businesses in a variety of sectors, including food delivery, rides and accommodation, are responsible for collecting and paying indirect taxes on behalf of their service providers.
