GST Council likely to reduce tax rate on food delivery to 5% | What it means

The GST Council might bring a cheer for food delivery apps such as Zomato and Swiggy as reports suggest that they might be receiving a cut in payable Goods and Services Tax.

According to a report by CNBC TV 18, the council might slash the GST on food delivery charges to 5 per cent. Currently the tax slab that it falls under is 18 per cent.

The Council is due to meet in Rajasthan’s Jaisalmer on Saturday, December 21, and the decision could be announced then. The tax cut will be applicable retrospectively from January 1, 2022, according to the report.

However there is a caveat in all of this. The reduced tax means that the food delivery companies will no longer be eligible to claim input tax credit while filing their GST. But still it is a big demand fulfilled by the government as the industry has been asking to be brought at par with the restaurants in terms of GST rates.

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Relief for Zomato on recent tax notice?

Zomato was recently handed a tax notice for payment of nearly Rs. 804 crore in taxes and penalties for the period of 2019-22. So will the claim by the CGST authorities in Thane, Maharashtra now be settled?

Even if the proposed tax cut comes into effect, it will only be applicable to the last three months of the period in question as it is only proposed to come into effect from January 1, 2022. So there is little to no relief for the food delivery company in that regard.

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As far as benefit to the consumers is concerned, it is also very unlikely as not being able to avail input tax credits (ITC) might mean even higher payment of taxes in some cases for the companies. All eyes will be on the council’s meeting on Saturday for a little more clarity on the subject.